Fitch Affirms the United Arab Emirates at ‘AA-‘; Outlook Stable
Fitch Ratings has affirmed the United Arab Emirates’ (UAE) Long-Term Issuer Default Ratings (IDRs) at ‘AA-‘ with a stable outlook, according to a rating note released by the agency. UAE’s ‘AA-‘ rating reflects low consolidated government debt, strong net external asset position and high GDP per capita.
It benefits from Abu Dhabi’s sovereign net foreign assets, which is 164% of UAE GDP in 2025, and are among the highest of Fitch-rated sovereigns.
Rating analysts said these strengths are balanced by weak governance indicators relative to rating peers, high geopolitical risk, the UAE’s high dependence on hydrocarbon income and the significant leverage of government-related entities (GREs).
The Stable Outlook reflects the expected resilience of oil export revenues during the Iran war, which largely offsets the immediate negative impact of the war, as well as abundant fiscal and external buffers, and expectation that individual Emirates will bear the cost of the war rather than the federal government.
Fitch expects a gradual reopening of the Strait of Hormuz from July. However, the course of the war is highly uncertain.
There are significant risks of a renewed flare-up, which could include greater disruption to oil and gas exports due to damage to energy production, processing and transportation assets, as well as a prolonged closure of the Strait, both of which would weigh on the UAE’s credit profile.
The damage from the war on non-oil growth and economic diversification is unclear; the longer and more structural the deterioration in the regional security environment, the greater the adverse impact, which could challenge the sovereign balance sheet.
Abu Dhabi’s 2026 export revenues will be higher than our pre-war forecasts despite the disruption, as higher prices (an average of USD87/bbl in 2026) and pipeline exports to Fujairah offset lower volumes through the Strait of Hormuz.
Crude oil constitutes the bulk of exports, and we consider Abu Dhabi’s oil export infrastructure less vulnerable to long-term damage than more concentrated and bespoke downstream oil or liquefied natural gas plants.
“ We project real GDP to shrink by 4.8% in 2026, with a 3.2% contraction in non-oil GDP and Dubai’s GDP shrinking by close to 7%”.
Fitch expects Dubai’s real GDP to remain below its 2025 level in 2027, as investment delays and the slow return of tourism and expat inflows weigh. Fitch expects all the Emirates will implement recovery programmes, but trend growth will not return to pre-war levels rapidly. Hydrocarbon GDP will contract by about 10% in 2026 and strongly rebound in 2027 with oil production no longer constrained by OPEC+ quotas.
Ratings analysts estimate that the UAE’s consolidated budget will remain in surplus in 2026 at 4.5% of GDP, despite a near 20% rise in spending to mitigate the immediate impact of the war and an expectation of large post-war recovery programmes.
Fitch expects surpluses in Abu Dhabi and Dubai and budget deficits in Ras Al Khaimah and Sharjah. Ratings analysts expect GRE spending to rise significantly for similar reasons.
The federal government (FG) is small, with revenues and expenditure close to 4% of GDP. Its remit is centred on the provision of essential public services such as infrastructure, healthcare, education and immigration and security.
It is required by law to balance its current budget (excluding capex) and has a record of broadly balancing the overall budget, with intra-year adjustments to spending and contributions from emirates to absorb shocks.
: Consolidated UAE government debt is forecast to rise to 27% of GDP in 2026, from 24.3% of GDP at the end of 2025, which was well below the ‘AA’ category median of 50.3%. Individual emirates have varied debt profiles.
“We project Abu Dhabi’s debt will increase as it continues to show a preference for debt over asset drawdowns, Sharjah to borrow to fund deficits, the FG to build the yield curve, while Dubai’s debt will be flat”.
Fitch views the UAE as having high economic leverage. We estimate overall contingent liabilities from GREs of the emirates and the FG in 2024 at about 63% of the UAE 2024 GDP.
Based on publicly available data, a large share of state-owned enterprise debt is at healthy entities with little risk, but many do not disclose financial data.
Rating analysts judge that close political and budgetary links, along with the strong influence of Abu Dhabi over the FG budgeting and the essential nature of public services it provides, place the FG higher in Abu Dhabi’s support hierarchy than individual emirates, should it be required.
Abu Dhabi does not provide an explicit guarantee that would ensure unconditional and timely support to the FG but has significant ex-ante and ongoing controlling power over the FG’s revenue and spending.
The Central Bank of the UAE data showed a 9% drop in FX reserves to USD277 billion in March 2026.
In Fitch’s view, the high starting point of FX reserves, combined with the large amount of Abu Dhabi Investment Authority assets, provides ample buffers to maintain macro stability, and analysts do not view discussions of a swap line with the US Fed as a sign of stress. Fitch projects a large drop in the current balance to 1.3% in 2026 from 10.6% in 2025.
The rating note stated that UAE banks appear resilient under Fitch’s base case for the war, reflecting sound financial metrics, ample liquidity and capital buffers.
Banks’ Viability Ratings could be at risk of asset-quality deterioration in an adverse scenario in which the Iran war has severe effects, with real estate lending the most likely source of stress. Cost of Healthy Diet in Nigeria Increases to N1,513 or $1.1 -NBS
