S&P raises credit rating outlook on Ras Al Khaimah to stable

Ras Al Khaimah had published official figures suggesting its population had increased nearly 50 per cent in three years. Antonie Robertson / The National

Months after tagging Ras Al Khaimah’s credit rating with a negative outlook, Standard & Poor’s has raised the outlook to stable and said the emirate is improving the reliability of its economic data.

“We view the authorities’ progress and long-term commitment to strengthen the emirate of Ras Al Khaimah’s government institutions and address data shortcomings as a positive development,” the agency said in a report late Friday.

The agency now rates RAK as “stable” with its A/A-1 ratings affirmed. In light of the agency’s spring report RAK made a concerted effort to answer the questions over increased population numbers. RAK had published official figures suggesting its population had increased nearly 50 per cent in three years.

“We had to find what was the cause of the jump, from 267,000 in 2009, and we validated it, as of 2013 we have 438,000 people residing in RAK, that is a federal number,” said Jason Budd, financing and ratings director at RAK Investment & Development Office. “The National Bureau of Statistics gives us population data, we don’t collect it ourselves. We did a significant study with the Emirates ID Authority to verify the number. The answer to how and why the population jumped has not been given at a federal level or by RAK. It caused an immediate drop in GDP per capita which is one of the main metrics for the rating.”

The spring S&P report, on the basis of the increased population figures, had revised the GDP per capita income of RAK down from $24,500 to $16,800. The new S&P report incorporates RAK’s free zones and increases its per capita GDP. The report states “Ras Al Khaimah is revising the scope of its GDP to now include the contribution of its three sizeable free trade zones, which could boost GDP by up to 20 per cent (and therefore increase GDP per capita to close to $20,000). We expect the government will disclose firmer estimates of the free-trade zones’ contribution to GDP toward the end of 2015.”

The new report highlights weaknesses in RAK’s administration, stating: “We consider the availability of demographic and economic data to be weak.”

However, it said that the questions raised by the original report have largely been answered and the gaps in data, data integrity and timely delivery focused upon.

Investment in RAK was not adversely effected by the spring report and the new report is being taken as a vote of confidence, Mr Budd said.

“It’s a recognition, it’s not just a correction of past issues,” said Mr Budd. “The report shows that RAK is a diverse economy that’s growing, only 5 per cent of our revenue comes from oil and gas, the free trade zones are booming and we are seeing an increased influx of persons living here and travelling to work in Dubai.

“Professional investors did not doubt when the negative outlook came out, they realised we were slightly maligned in that report, and there was no reason for fear. We will move upwards in the ratings now but I can give no time frame on that.”

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