Emirates: Abu Dhabi’s credit rating has been reaffirmed in both local and foreign currencies, maintaining a robust “AA/A-1+” with a stable outlook, according to S&P Global. 

The firm expects the Emirate’s fiscal and external positions to remain strong over the next two years amid continued prudent policymaking and their hydrocarbon sector assumptions. At the same time, the agency maintained its “AA+” transfer and convertibility assessment in Abu Dhabi. 

According to the report, Abu Dhabi’s oil production is expected to grow over the medium term “as OPEC+ quotas are lifted and state-owned oil producer, refiner, and distributor Abu Dhabi National Oil Co. increases its capacity to 5 million barrels per day by 2027 from about 4 million bpd.” 

S&P Global noted that oil production is expected to decline to 2.9 million bpd on average in 2023, a decrease of 6.45 percent from last year, based on supply cuts announced by the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, in October. It is also expected to bounce back to 3.22 million bpd in 2024 and 3.32 million bpd in 2025. 

“We estimate the government’s net asset position at about 336 percent of GDP (gross domestic product) in 2023,” said S&P Global in the report. 

It went on to say: “The exceptional strength of the government’s net asset position provides a buffer to counteract the effects of oil price swings and geopolitical uncertainty in the Gulf region on economic growth, government revenue, and the external account.” 

The report explained that Abu Dhabi’s economic growth rose to 9.3 percent in 2022, with the hydrocarbon sector expanding by 10.2 percent and contributing 50 percent of the increase in total GDP.  

The nonhydrocarbon sector increased by 8.4 percent, with contributions from the manufacturing sector going up by 8.2 percent, construction by 7.8 percent, financial and insurance by 5.6 percent, and public administration, defense, and social security by 5.5 percent. 

“As a result, real GDP recovered to 2019 levels,” it stated. 

The US-based credit rating agency highlighted that Abu Dhabi derives “about 70 percent of government revenue from the hydrocarbon sector.” 

They estimated that economic growth will be broadly flat with 0.4 percent contraction in 2023 “with nonhydrocarbon sector growth of about 4 percent, partly due to tighter monetary policy conditions.” 

Furthermore, the sector is expected to experience a comparable expansion rate through the period leading up to 2026.  

It said: “In our view, activity in the hydrocarbon sector will decline about 4 percent in 2023 due to the OPEC+ production cuts but increase close to 10 percent in 2024, fueling an expansion in economic activity for the whole economy of about 6.5 percent.”