Standard & Poor’s warns on RAK rating as it questions population data

Ratings agency questioned the official population number provided by the Ras Al Khaimah Government.

Standard & Poor’s says it might downgrade its rating for Ras Al Khaimah and has questioned population data provided by the emirate’s government.

S&P said that there was a one-in-three chance that it would downgrade RAK’s A/A-1 rating over the next two years after the emirate published official figures suggesting that its population had increased by nearly 50 per cent in three years.

S&P is downgrading the emirate’s bond rating outlook from stable to negative.

Officials at the RAK Department for Economic Development and the RAK Investment Authority were unavailable to comment yesterday.

Official government statistics indicate an increase in population to 413,000 in 2010, from a previous estimate of 279,000 for that same year, S&P said.

“We do not consider a population increase of more than 50 per cent – from the official population estimate of 267,000 in 2009 – as realistic,” S&P said on Friday. “We understand that the government will review the accuracy of the data over 2014-2015. Should the data be confirmed, our estimate of Ras Al Khaimah’s GDP per capita in 2014 could fall to about US$17,500 from approximately US$24,500.

“We consider that the availability and timeliness of demographic and economic data – including population, national income, and external accounts – is among the weakest of the sovereigns we rate, and we see this as a ratings constraint.”

S&P asserted that government institutions in the emirate were unable to withstand the loss of key personnel without serious disruption. It also noted a lack of economic diversification not tied to the construction industry.

Nonetheless the ratings agency confirmed its A/A-1 rating for the emirate, saying it considered RAK’s fiscal risks to be limited, because of the government’s minimal spending responsibilities, its strong government balance sheet and ongoing indirect financial support from the federal government.

In November the emirate issued a $500 million sukuk, its first since 2009, through RAK Capital.

Previously RAK issued a Dh1 billion sukuk in May 2008 and a $400m sukuk in 2009 aimed at financing infrastructure development.

lbarnard@thenational.ae

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Published: May 10, 2014 04:00 AM

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