Standard & Poor's Ratings Services said today that it has affirmed its 'AA' long-term and 'A-1+' short-term sovereign credit ratings on the Emirate of Abu Dhabi, a member of the United Arab Emirates (UAE). The outlook is stable. Our Transfer & Convertibility assessment is unchanged at 'AA+'. "The ratings on Abu Dhabi are supported by the government's very strong asset position, which provides significant financial flexibility, and that has allowed the emirate--through strong countercyclical policies and preemptive support to the financial sector--to face the global economic downturn with a high degree of resilience," said Standard & Poor's credit analyst Luc Marchand.
The ratings are also underpinned by the country's domestic political stability and wealth, reinforced by its rich resource endowment, and policies that reinforce Abu Dhabi's integration with the global economy. The ratings are constrained by the geopolitical risks that face all sovereigns in the region, the lack of transparency, and limited availability of financial and economic data, particularly regarding the government's assets, as well as the contingent liabilities arising from the banking system and the public sector of the UAE as a whole.
"The stable outlook on Abu Dhabi balances the Emirate's strong financial position and prudent policies against geopolitical risks, high contingent liabilities, and potential impediments to growth stemming from undeveloped institutions," said Mr. Marchand.
Furthermore, significant improvements in transparency and availability of financial and economic data, and progress on institutional reforms such as institutions necessary to improve the functioning of a market economy, could have a favorable impact on the ratings in the coming years, as would a lasting reduction of geopolitical risk. Conversely, and although we deem such a scenario as currently unlikely, we could lower the ratings by several notches if regional geopolitical risks escalate sharply, threatening Abu Dhabi's political and economic stability, or if domestic events comprise political stability.
