Abu Dhabi’s Credit Rating Affirmed by S&P Global

S&P Global has officially confirmed Abu Dhabi’s credit rating at a solid “AA/A-1+” with a stable outlook in both local and foreign currencies. The firm expects Abu Dhabi’s fiscal and external positions to remain robust over the next two years, attributing this to continued prudent policymaking and assumptions about the emirate’s hydrocarbon sector.

According to the report, Abu Dhabi’s oil production is projected to increase in the medium term, with the state-owned oil producer, Abu Dhabi National Oil Co., set to boost its capacity to 5 million barrels per day by 2027.

The report also indicates that oil production is anticipated to decline in 2023 due to supply cuts announced by OPEC+ in October, but is expected to bounce back in 2024 and 2025.

S&P Global highlighted that the government’s net asset position is estimated to be about 336 percent of GDP in 2023, providing a buffer against oil price fluctuations and geopolitical uncertainty in the region.

Economic growth in Abu Dhabi rose to 9.3 percent in 2022, with the hydrocarbon sector accounting for 50 percent of the increase in total GDP. The nonhydrocarbon sector also experienced growth, particularly in manufacturing, construction, financial and insurance, as well as public administration, defense, and social security.

The credit rating agency noted that approximately 70 percent of government revenue in Abu Dhabi is derived from the hydrocarbon sector. They expect economic growth to be relatively flat in 2023 with a 0.4 percent contraction, driven by tighter monetary policy conditions, but anticipate a comparable expansion rate leading up to 2026.

In terms of the hydrocarbon sector, S&P Global forecasts a decline in activity in 2023 due to production cuts by OPEC+, followed by a significant increase in 2024 that will fuel an expansion in economic activity for the entire economy.

Overall, the report by S&P Global provides a positive outlook for Abu Dhabi’s credit rating, highlighting the strength of the emirate’s fiscal and external positions, as well as the expected growth in its oil production and the resilience of its nonhydrocarbon sectors.

This reaffirmation of Abu Dhabi’s credit rating by S&P Global serves as an indication of the emirate’s sound economic policies and robust financial position, instilling confidence in its ability to weather economic uncertainties and fluctuations in the global market.