A. SREENIVASA REDDY (ABU DHABI)
Abu Dhabi’s GDP is expected to grow 3.7% this year, driven by higher hydrocarbon output, while increased capital expenditure, other counter-cyclical support measures and resilient consumer spending are expected to sustain growth in the non-oil economy, Fitch Ratings said in its latest commentary.
Fitch forecast a sharp acceleration in Abu Dhabi’s GDP growth to 15.1% in 2027, driven by a jump in oil production following the UAE’s exit from OPEC+ and facilitated by its ability to bypass the Strait of Hormuz through pipelines to Fujairah.
The latest forecast represents a significant upward revision from Fitch’s May assessment, when it projected Abu Dhabi’s economy would contract by 1% in 2026.
Fitch Ratings has affirmed Abu Dhabi’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at “AA” with a Stable Outlook despite war-related costs imposed on the economies of the Gulf countries.
An “AA” rating indicates very strong capacity to meet financial obligations, two notches below the highest “AAA” rating. The IDR reflects the overall creditworthiness of a sovereign — essentially its ability to repay debt in foreign currency. A Stable Outlook means the rating is unlikely to change in the near term.
In its commentary issued on October 30, Fitch projected a significant increase in the UAE’s oil production to 4.2 million barrels per day in 2027 as conditions around the Strait of Hormuz normalise and a second pipeline through Fujairah becomes operational around the middle of the year.
The agency said the UAE’s oil production capacity is around 5 million barrels per day, leaving scope for output to exceed its forecasts depending on the country’s oil production policy following its exit from OPEC+.
Fitch expects average oil production in 2026 to exceed the 2025 level, supported by the existing Fujairah pipeline, which bypasses the Strait of Hormuz, and continued oil shipments through the Strait despite disruptions caused by the conflict.
Oil production is projected to increase further, although more modestly, in 2028.
Higher oil revenues are also expected to strengthen Abu Dhabi’s public finances, more than offsetting a largely war-related increase in government spending.
Fitch forecast a budget surplus of 2.3% of GDP in 2026, excluding investment income from the Abu Dhabi Investment Authority (ADIA), compared with a surplus of 2.1% in 2025.
Including ADIA’s investment income, the surplus is projected to reach 7.1% of GDP this year, indicating the substantial contribution of the emirate’s investment assets to its financial position.
The budget surplus is expected to widen further in 2027 as oil production increases, before narrowing in 2028 as a result of lower oil prices.
Fitch expects Brent crude to average $70 a barrel in 2027 and $60 in 2028.
Government spending is likely to remain elevated through 2028, with scope for additional expenditure measures if the authorities decide to strengthen confidence or respond to further economic shocks.
Abu Dhabi’s financial strength is also underpinned by its substantial sovereign assets and relatively low government debt. Fitch estimated the emirate’s sovereign net foreign assets, largely comprising ADIA investments, at 300% of GDP at the end of 2025. This compares with a median of 45.1% for sovereigns carrying an “AA” rating.
Government debt stood at 19.3% of GDP at the end of 2025, significantly below the 46.5% median for similarly rated sovereigns.
The agency said projected fiscal surpluses would be allocated to government-related entities (GREs) undertaking long-term development projects and to deposits in local banks.
Fitch estimated the debt of Abu Dhabi’s GREs at more than 48% of GDP in 2025. However, it considers the associated financial obligations manageable because of the emirate’s substantial fiscal reserves, the generally profitable operations of these entities and their large asset bases, which substantially exceed their debts.
On the non-oil economy, Fitch expects growth to recover over the 2026–2028 period, supported by projects financed by GREs, although the pace is likely to remain below that recorded in the years immediately preceding the conflict.
The agency also highlighted the resilience of Abu Dhabi’s banking sector, supported by strong liquidity and capital buffers. It said the emirate’s leading banks have limited exposure to corporate real estate and would retain ample liquidity even under a stress scenario, although a more severe impact from the conflict could create risks to asset quality.