Today's Edition
MAYS IBRAHIM (ABU DHABI)
The UAE has the fiscal firepower to ride out the economic disruptions caused by the recent regional situation, according to a new S&P Global Ratings report, with recovery expected as early as next year.
The rating agency said the country’s substantial sovereign wealth fund assets and foreign exchange reserves provide a critical buffer against short-term volatility.
Even in an extremely unlikely scenario where oil production is halted entirely, the government’s fiscal position would remain in surplus for approximately six months without any spending adjustments.
“We think the UAE will continue to benefit from the fundamental factors that have underpinned its fast growth, economic resilience, and successful diversification,” the report stated.
Notably, the UAE’s liquid assets are estimated at about 200% of GDP, according to S&P. A key bright spot is the UAE’s exit from OPEC and OPEC+ production quotas, effective May 1.
Freed from bloc limits, Abu Dhabi National Oil Co. (ADNOC) has plans to boost capacity to 5 million barrels per day (bpd) by 2027, up from pre-war levels of 3.4 million bpd.
A new West-East pipeline project, expected to become operational by 2027, will double export capacity through Fujairah, bypassing the strait of Hormuz chokepoint.
S&P forecasts oil production will climb to 4 mbpd by 2027 and 5 mbpd by 2029, driving real GDP growth to average 6% over 2027-2029. Federal and emirate-level authorities have rolled out relief packages to cushion affected sectors.
Dubai announced Dh2.5 billion in fee deferrals and a freeze on private school fees, while Abu Dhabi imposed a rental freeze across residential, commercial, and industrial properties.
The Central Bank has eased liquidity requirements and opened term lending facilities for banks.
The June 17 framework agreement between the US and Iran aligns with S&P's base case that Strait of Hormuz disruptions will ease in the second half of 2026, though the agency cautioned that operational bottlenecks and infrastructure damage mean energy flows will recover gradually.
UAE banks entered the crisis in a strong position, S&P noted, with a net external asset position of $233 billion, equivalent to 40% of domestic loans and the highest among Gulf Cooperation Council banking systems.
Deposits grew 4.9% in the first four months of 2026, and non-performing loan ratios held steady at 2.4%.
