Fitch Ratings on Monday affirmed the emirate of Ras Al Khaimah’s long-term issuer rating of A and assigned it a stable outlook, based on its low government debt and high gross domestic product per capita.
“The emirate derives substantial support from its membership of the UAE federation,” Fitch said in a report. “It shares the UAE monetary and exchange rate system of a credible US dollar peg and absence of exchange controls.”
Close integration within the UAE has also allowed RAK to focus on its development strategy and build a relatively diversified economy dominated by manufacturing and services.
The government is making progress on developing the emirate as a tourist destination, and plans a 90 per cent expansion of hotel capacity by 2022. Meanwhile, visitor arrivals to RAK have trended upwards in the past two years, the report noted.
In addition, the development of RAK’s container port could spur new investment in the free zones and the broader economy. GDP growth is expected to pick up in 2018 and 2019 on the back of higher oil prices, after slowing to 1.5 per cent in 2017 from 4.6 per cent in 2016, Fitch said.
Government debt (including that of state-owned enterprises) is expected to fall to around 20 per cent of GDP in 2018 from 33 per cent in 2015, and the rating agency expects a fiscal surplus of 0.7 per cent of GDP in 2018. The government balance will be boosted by over one per cent of GDP with the proceeds from the sale of its stake in Union Cement Company.
However, the emirate’s small size and “weaknesses in the policy framework”, including poor availability of economic data, weigh on the ratings, the report added.
“Further expansion of capital spending and the wage bill will outweigh revenue growth, principally in state-owned rock quarries and hotels,” the report said. Growth in hotel revenues should be supported by the completion of renovations in several properties to meet rising demand, it added.