Standard & Poor’s (S&P) has reaffirmed the A/A-1 long- and short-term foreign and local currency sovereign credit ratings for Sharjah and maintained its stable outlook.
“The ratings are supported by Sharjah’s continued solid growth and low government debt burden,” said S&P in a statement late on Friday.
“Also underpinning the ratings are the advantages Sharjah derives from its membership in the United Arab Emirates, which include low external risks.”
The rating agency forecast economic growth in the emirate will dip to 3.5 per cent this year from an estimated 5.5 per cent last year due to lower oil prices and tightening banking sector liquidity.
“However, offsetting this, we expect large public sector infrastructure projects in Dubai and Abu Dhabi will provide support for Sharjah’s economy and also note that economic growth now depends less on the hydrocarbons sector,” said S&P.
“We think these factors will fuel increased consumption.”
The rating agency said the fiscal deficit between 2015 and 2018 is likely to average less than 2 per cent of GDP.
It has also forecast that net general government debt will average 8 per cent of GDP in the same period.
“In our baseline scenario, we expect that government borrowing will be limited to that required for capital spending, and potentially, for a small proportion of deficit financing,” the agency said.
Sharjah, the third-largest emirate, increased its GDP 13.3 per cent in 2014 to Dh113.9 billion from Dh100.53bn in 2013, according to the Sharjah Investment and Development Authority (Shurooq).
Sharjah sold a 10-year US$750 million Islamic bond or sukuk last year, the first capital market debt sale for the emirate. The sale attracted orders from investors 10 times greater than what was on offer, amid strong demand by international investors for bonds from the economically buoyant UAE.
In February, S&P affirmed Abu Dhabi’s AA long-term and A-1+ short-term foreign and local currency sovereign credit ratings, noting that the emirate’s fiscal and external buffers were sufficiently strong to withstand the oil price slump.
dalsaadi@thenational.ae
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