Abu Dhabi’s economic growth will average 2.5 percent in the four years through 2022 as it benefits from higher oil production and prices, S&P Global Ratings estimated. Abu Dhabi’s economy still depends heavily on oil, deriving 50 percent of its real gross domestic product and more than 90 percent of central government revenue from the hydrocarbon sector, the ratings company said in a report May 31. Oil will continue to dominate the economy despite diversification efforts, it said.
S&P Global projects economic growth in the largest and richest of the seven sheikhdoms that make up the UAE to accelerate to 2 percent this year from 1.8 percent in 2018. It expects growth to accelerate to 2.5 percent in 2020 and 2021 before climbing to 3 percent in 2022. S&P expects Brent will average $60 per barrel this year and next, before dropping to an average $55 a barrel in 2021.
Brent has climbed 20 percent this year to $64.49 a barrel.
The UAE’s central bank provided a grim forecast May 29 for OPEC’s third-biggest producer, projecting economic growth will fall far short of previous estimates and undershoot the International Monetary Fund’s projections. The oil economy is set to grow 2.7 percent, a downward revision from 3.7 percent, according to the central bank. The non-oil economy will expand an estimated 1.8 percent, versus an earlier forecast for 3.4 percent, it said.
The ratings company also affirmed its AA credit rating for Abu Dhabi, with a stable outlook underpinned by the emirate’s large fiscal buffers and projects the Abu Dhabi Investment Authority’s assets will average above 250 percent of GDP over 2019-2022. ADIA is one of the sheikdom’s sovereign wealth funds.
Abu Dhabi may not raise debt in 2019, instead opting to finance its fiscal deficit of 4 percent of GDP and Eurobond repayment from liquid assets, S&P predicted.
It doesn’t expect the Abu Dhabi government to issue domestic bonds over the next couple of years, instead of waiting until the UAE federal government does.
On a broader level, S&P Global predicts the Abu Dhabi general government debt levels to remain largely stable at less than 7 percent of GDP through 2022.
The Daily Star
03/06/2019
