Fitch Affirms UAE’s AA- Rating With Stable Outlook

Fitch Ratings affirmed the long-term issuer default rating of the United Arab Emirates at “AA-” with a stable outlook, citing the country’s strong fiscal position, low consolidated government debt, and substantial external assets despite heightened geopolitical risks linked to the regional conflict with Iran.

In a report released Friday, Fitch said the UAE’s high per-capita GDP and robust sovereign external balance sheet remain key strengths supporting the rating.

A major pillar behind the sovereign assessment is the vast stock of foreign assets held by Abu Dhabi, whose sovereign net foreign assets reached an estimated 164% of the UAE’s GDP in 2025, among the strongest sovereign asset positions of all countries rated by Fitch.

However, the agency noted that these strengths are partially offset by weaker governance indicators compared with similarly rated peers, elevated geopolitical risks, heavy dependence on oil and gas revenues, and high debt levels among government-related entities.

Fitch said the stable outlook reflects expectations that resilient oil-export revenues during the Iran war will largely compensate for the direct economic impact of the conflict. The agency also pointed to the UAE’s substantial fiscal and external reserves, alongside expectations that individual emirates, rather than the federal government, would bear most war-related financial costs.

Fitch expects the gradual reopening of the Strait of Hormuz to begin from July onward, although it warned that the trajectory of the conflict remains highly uncertain.

The agency cautioned that renewed escalation poses significant risks to the UAE’s credit profile, particularly if energy production, processing, or transportation infrastructure suffers damage, or if the Strait of Hormuz remains closed for an extended period.

According to Fitch, prolonged regional instability could also undermine non-oil economic growth and slow the UAE’s diversification agenda, particularly if security conditions deteriorate further across the Gulf region.

“The longer and more severe the regional security deterioration becomes, the greater the negative economic impact could be,” the agency indicated, warning that such developments may eventually place pressure on sovereign finances.

Fitch projected that Abu Dhabi’s export revenues in 2026 would exceed pre-war expectations despite ongoing disruptions, supported by higher oil prices averaging around $87 per barrel and continued exports through the Fujairah pipeline route.

The agency noted that crude oil exports account for the majority of Abu Dhabi’s external revenues and argued that the emirate’s export infrastructure is less vulnerable to prolonged damage than more concentrated refining or liquefied natural gas facilities.

Despite expectations for government spending to rise by nearly 20% to mitigate the direct effects of the war and finance post-war recovery initiatives, Fitch forecast that the UAE’s consolidated budget would maintain a surplus equivalent to 4.5% of GDP in 2026.

The agency also expects both Abu Dhabi and Dubai to remain in fiscal surplus, while Ras Al Khaimah is projected to post a deficit under a negative watch outlook and Sharjah is expected to remain in deficit as government spending rises across the federation.