Fitch reaffirms Abu Dhabi AA credit rating

The ratings agency Fitch reaffirmed Abu Dhabi’s AA credit rating, pointing to the country’s vast sovereign wealth fund holdings as an ample buffer against the low oil price.

While the country’s fiscal deficits have widened as the collapse in oil prices drives government revenue lower, Fitch said that a mix of subsidy reforms, drawdowns on reserves and government-related entity deposits, and new local debt issuance mean that the shortfall is manageable.

Fitch also said that the issue ratings on Abu Dhabi’s senior unsecured foreign currency bonds have been affirmed at AA.

Fitch reiterated its call for the UAE to improve avail­ability of standard economic data, and criticised the country’s “weak economic policy framework, particularly at the federal level”.

“Standard international investment position and balance of payments data are unavailable, and there is less information on the sovereign balance sheet than in peer [countries],” Fitch said.

In Qatar, the slowdown in the country’s massive infrastructure spending will hit the banking sector this year, Standard & Poor’s said.

“Operating conditions for Qatari banks will toughen in 2016… [as] the Qatari public sector withdraws some of its deposits from the domestic banking system,” the ratings agency said.

Qatari banks have experienced double-digit credit growth over the past few years.

But analysts have worried that local credit markets could now be saturated, as the country’s loan-to-deposit ratio rises to above 115 per cent.

“We anticipate that banks will manage credit growth more conservatively,” S&P said.

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