Fitch Ratings affirms AA rating for Abu Dhabi

Fitch Ratings announced on 16 August that it has affirmed Abu Dhabi’s long-term foreign and local currency Issuer Default Ratings (IDR) at AA with a stable outlook.

The issue ratings on Abu Dhabi’s senior unsecured foreign and local currency bonds have also been affirmed at AA. The short-term foreign currency IDR has been affirmed at F1+. The UAE country ceiling has been affirmed at AA+.

“Abu Dhabi’s external sovereign balance sheet is estimated to be the second-strongest of all countries rated by Fitch, behind Kuwait,” Fitch Ratings said in a statement. “Its sovereign net foreign assets are estimated to have increased to 178 per cent of GDP at end-2013, from 151 per cent of GDP one year earlier.”

“The repayment of a Eurobond in early 2014 has cut central government external debt to 0.6 per cent of GDP,” Fitch Ratings said. “Sovereign net foreign assets are conservatively forecast to remain around 170 per cent of GDP by end-2016.”

Fiscal spending rose by around 3 per cent of GDP and revenue fell slightly in 2013, Fitch Ratings said. Abu Dhabi nevertheless recorded a near-double digit fiscal surplus once Abu Dhabi National Oil Company dividends and Abu Dhabi Investment Authority (ADIA) investment income are included.

“Falling oil revenues, in line with Fitch’s price forecasts will narrow the surplus each year to 2016,” Fitch Ratings said. “The current account surplus is estimated by Fitch to fall to 7.6 per cent of GDP in 2016 from 16.6 per cent of GDP in 2013.”

Real GDP grew by 5.2 per cent in 2013. Non-oil growth was 7.4 per cent. Fitch Ratings said that non-oil growth should remain buoyant, supported by project spending, a benign external environment and positive domestic sentiment.

Fitch Ratings said the Abu Dhabi’s rating could be raised by action to:

* increase the transparency and availability of key data, including the sovereign balance sheet.

* address deficiencies in structural indicators and strengthen policymaking institutions.

Fitch forecasts Brent crude will average $108 a barrel in 2014, $100 a barrel in 2015 and $95 a barrel in 2016.