Abu Dhabi Affirmed
S&P Global Ratings this week affirmed Abu Dhabi's AA rating with a stable outlook, recognising the emirate's robust fiscal management, infrastructure-driven growth, and advancing economic diversification. Rated in-line with Moody’s and Fitch (aa2/AA), the rating agency highlighted Abu Dhabi's position as having one of the world's strongest government balance sheets whilst successfully strengthening its non-oil economy.
The UAE's strong economic performance underpins this rating, with GDP rising 3.8%yoy in the first nine months of 2024. The non-oil sector led this growth, expanding 4.5%. While approximately half of Abu Dhabi’s economic output still stems from the hydrocarbon sector, volatile economic performance is gradually being offset by the rising contribution of other industries.
S&P forecasts real GDP growth of 2.5% for 2025, accelerating to 3.5% annually from 2026-2028, driven by increased oil production and vigorous non-oil activity. Abu Dhabi's diversification strategy is delivering exceptional results, with the non-oil economy expanding 6.2% in 2024 to reach a record 54.7% share of GDP, led by finance, construction, manufacturing, and trade sectors.
Moreover, the emirate's fiscal position remains remarkably resilient, posting a 6.7% GDP surplus in 2024. Whilst this is expected to narrow in 2025, subsequent years should see renewed widening supported by robust oil revenues and corporate tax collection beginning in 2026. With government liquid assets exceeding 300% of GDP and a projected net asset position of 327% by 2025, Abu Dhabi enjoys exceptional insulation from global economic shocks.
Structural reforms continue attracting foreign investment through 100% foreign ownership laws, liberalised personal and family legislation, and the Golden Visa Programme. These initiatives support Abu Dhabi's transition towards a more diversified, investor-friendly economy.
Regional stability is enhanced by strategic infrastructure, particularly the Abu Dhabi Crude Oil Pipeline enabling half of crude exports to bypass the Strait of Hormuz via Fujairah. Combined with substantial fiscal reserves managed primarily through the Abu Dhabi Investment Authority, this provides critical protection against geopolitical tensions and financial shocks.
The UAE's commitment to carbon neutrality by 2050, alongside planned renewable energy investments, supports long-term sustainability. S&P's stable outlook reflects expectations of continued fiscal strength, with Abu Dhabi's combination of deep reserves, mature capital markets, and twin hydrocarbon-diversification strategy positioning it well against global economic uncertainties.
Our proprietary Net Foreign Asset (NFA) model identifies Abu Dhabi as one of the world's wealthiest nations. Combined with its position as the highest-rated issuer in the region and compelling relative value, these factors underpin our high-conviction allocation to Abu Dhabi sovereign and quasi-sovereign bonds within the EPIC Next Generation Bond strategy.
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