Fitch Ratings has affirmed the emirate of Ras Al Khaimah’s long-term issuer rating of A and assigned it a stable outlook, based on its low levels of government debt and high gross domestic product (GDP) per capita.
“The emirate derives substantial support from its membership of the UAE,” the ratings agency said in a report, citing the UAE's common monetary and exchange rate system and its "credible" dollar peg as significant advantages.
“Most public services and infrastructure are provided directly by the federal government, making RAK's spending more flexible than peers and relieving the emirate of some of the spending needs of a typical sovereign,” it added.
The ratings agency expects the debt of the government and its state-owned enterprises (SOEs) to fall to below 20 per cent of GDP in 2019 from 33 per cent in 2015. It will fall further to about 17 per cent of GDP in 2020 as the government uses VAT receipts for the early repayment of Dh678 million of private placements.
Fitch forecasts a fiscal surplus of 2.7 per cent of GDP in 2019, largely underpinned by the emirate's receipt of close to two years' worth of VAT, amounting to over 2 per cent of GDP. It expects GDP to fade slightly to 2.5 per cent this year from 2.8 per cent in 2018 as "UAE-wide growth is expected to remain muted".
The current pipeline of UAE projects, Abu Dhabi's Ghadan 21 Dh50 billion stimulus package announced in 2018 and the diversification of export markets will support mining and quarrying activity in the emirate, which recorded growing profits in the first quarter of this year.
“The development of RAK's container port could also spur new investment in the free zones and the broader economy,” Fitch's report said.
However, it added that the continuation of a housing market slump in Dubai has had a knock-on effect, leading to a reduction in building permits and mortgages issued in the emirate.