The UAE’s credit profile reflects the country’s fiscal strength, its high per capita income and its political stability, according to Moody’s Investors Service.
In its annual credit analysis of the Arab world’s second-largest economy, the ratings agency said its stable outlook on the UAE's economy reflects its broadly balanced credit pressures. Its “baseline forecast assumes that nominal gross domestic product of the country will recover to pre-pandemic levels over the next three years”, the ratings agency said on Wednesday.
Moody's, which has an Aa2 rating on the country – its third-highest – said the UAE's economic strength is derived from its high income levels, resource endowment and competitiveness.
Its “moderately large size, abundant hydrocarbon reserves with low cost of extraction, vibrant non-oil economy and well-developed infrastructure”, are reflective of its economic strength, Moody’s credit analysts Thaddeus Best, Rafay Ahmad and David Rogovic, said.
“We have adjusted the UAE's [economic strength] score from the initial outcome of 'a2' [to 'aa3'] to reflect the country's exceptionally high wealth levels and its very large natural hydrocarbon endowment.”
This score is shared by Aaa-rated sovereigns such as the Netherlands or Sweden and it is one notch above that of its some oil-exporting peers in the GCC, they said.
At $63,590 in purchasing power parity terms, the UAE’s 2019 GDP per capita ranks as one of the highest among sovereigns rated by Moody’s.
“The country’s economy is also relatively large in nominal GDP terms – at $354 billion in 2020 – and ranks in the top quartile of the sovereigns we rate, pointing to above-average resilience to shocks,” Moody’s analysts said.
Moody's affirmed the UAE ratings earlier this month with a stable outlook on the back of the government's quick response to counter the Covid-19 pandemic, which it said did not materially affect its economy.
The UAE rolled out its mass Covid-19 inoculation programme last year, with almost 50 million tests conducted and in excess of 12 million vaccine doses administered since the pandemic began. With aggressive testing and a quick vaccination drive, the country has managed to reduce Covid-19 cases in the second wave, as opposed to parts of Europe, the Americas and India, where infection rates have risen.
The rapid rollout of the coronavirus vaccine in the UAE presents “upside” to Moody’s economic forecast, as “it could support a more rapid recovery in domestic tourism and provide a boost to the hospitality and retail sectors".
In a separate assessment, the ratings agency said Abu Dhabi’s credit profile – also Aa2 with a stable outlook – is reflective of the emirate’s balance sheet strength and its vast hydrocarbons reserves. Its fiscal strength remains resilient to shocks, it said.
"We expect Abu Dhabi’s fiscal strength will remain resilient to risks related to the pandemic," the analysts said.