UAE sovereign rating affirmed at AA- with stable outlook

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UAE sovereign rating AA- stable

Highlights

Fitch affirmed UAE's Long-Term Issuer Default Ratings at 'AA-' with Stable Outlook, citing low government debt, strong external assets, and high GDP per capita.
Fitch forecasts UAE's consolidated budget surplus at 4% of GDP in 2026 despite nearly 20% higher spending, with government debt projected at 22.8% of GDP.
Central bank foreign exchange reserves decline to $265 billion in August 2026 from over $300 billion in February, supporting macroeconomic stability even as current account surplus drops to 6.7% of GDP.

War impact and rating rationale

As reported by Fitch Ratings, the agency has affirmed the United Arab Emirates' Long-Term Issuer Default Ratings at "AA-" with a Stable Outlook, citing low consolidated government debt, a strong net external asset position and high GDP per capita.

Fitch says the Stable Outlook reflects resilient oil export revenue during the Iran war, which largely offsets the immediate negative effects of the conflict, and the expectation that the costs of the war will be borne by individual emirates rather than the federal government. The agency expects a gradual re-opening of the Strait of Hormuz from the first quarter of 2027, while assuming periodic strikes and counterstrikes continue until then, mostly affecting military targets and ships.

The rating agency says Abu Dhabi's 2026 export revenues are set to exceed its pre-war forecasts because higher oil prices and export volumes compensate for disruption. It forecasts average oil prices of $87 a barrel in 2026 and says exports continue through the Fujairah pipeline and via the Strait of Hormuz under U.S. protection.

At the same time, Fitch projects real GDP growth of 0.5% in 2026, with non-oil GDP contracting by 1.5% and Dubai's economy shrinking by close to 5%. It expects Dubai's real GDP to remain below its 2025 level in 2027 as logistics and manufacturing are disrupted and tourism and expatriate inflows recover only slowly, even as hydrocarbon GDP rises about 7% in 2026 and 26% in 2027 after OPEC+ output constraints ease.

Fiscal buffers and wider credit risks

The agency estimates the UAE's consolidated budget will remain in surplus at 4% of GDP in 2026 despite a near 20% rise in spending to limit the immediate impact of the war and support recovery programmes. Fitch expects surpluses in Abu Dhabi and Dubai, but deficits in Ras Al Khaimah and Sharjah, while government-related entities are also likely to increase spending significantly.

Fitch describes the federal government as small, with revenue and expenditure each close to 4% of GDP, focused on essential public services including infrastructure, healthcare, education, immigration and security. It forecasts consolidated government debt at 22.8% of GDP in 2026, up slightly from 22.6% at the end of 2025 and still well below the AA category median of 45%.

The report also points to high economy-wide leverage, with contingent liabilities from government-related entities estimated at about 63% of GDP in 2024. Fitch says many state-owned entities appear healthy, but limited financial disclosure from some borrowers remains a constraint on assessing the full risk profile.

External buffers remain a key support for the rating. Central bank foreign exchange reserves stand at $265 billion in August 2026, down from more than $300 billion in February, and Fitch says that reserve position, together with Abu Dhabi Investment Authority assets, provides ample capacity to preserve macroeconomic stability even as the current account surplus narrows to a projected 6.7% of GDP in 2026 from 13.3% in 2025.

Fitch adds that UAE banks appear resilient in its base-case scenario, supported by solid financial metrics and ample liquidity and capital. Still, it says a more severe war scenario could pressure asset quality, with real estate lending the most likely source of stress.

We have previously detailed Switzerland’s bank rescue strategy and how it fueled doubts across Europe amid geopolitically driven banking stress.

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