Growth in Abu Dhabi and Dubai will remain at a sustained level of 3 percent over the next several years if oil prices remain stable, according to Fisch Asset Management.
The growth, however, will remain modest when compared to the 4 percent per annum achieved before 2015.
A report by Independent Credit Review - a subsidiary of Fisch – confirmed Abu Dhabi’s quality rating as AA-, benefiting from comfortable reserves but with a forecast of slightly negative national budgets and rising debt over the next few years.
Dubai, for its part, was upgraded to BBB+, which Fisch said stems from a gradual reduction of total debt, including contingent obligations from state-owned companies from 141 percent in 2013 to 111 percent at the end of 201.
The report noted that VAT will help support the UAE’s fiscal situation in light of lower oil-related activities.
Among the concerns highlighted in the report are Abu Dhabi’s high dependence on oil production and high debt levels of state-owned enterprises and significant investments related to Expo in Dubai.
The report notes that the UAE’s debt position has been gradually defused since the 2008 crisis, primarily due to robust GDP growth over the last few years.
“The United Arab Emirates is seeing a new period of slow and steady economic growth, supported by twin boosters of oil-producing giant Abu Dhabi partnered with Dubai benefitting from many years of efforts towards diversification,” said Philipp Good, CEO and head of portfolio management at Fisch.
“The UAE should certainly prepare against risks, however – for example, Dubai’s tourism and construction industry is strongly dependent on geopolitical stability, and regional, European and international visitors, meaning it will be exposed to any escalation in diplomatic disputes within the GCC or the knock-on effects of Brexit,” he added.