Won «AA2» with a stable outlook for the national economy

Moody's gives the UAE the strongest sovereign rating in the region

New business growth reached its highest level in 20 months in April.

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Moody's credit rating agency has granted the UAE government an "AA2" rating in creditworthiness, with a stable outlook for the national economy, which is the strongest sovereign rating of its kind in the region.

According to an assessment released by the agency yesterday, Moody's said that there are several factors that support the classification, one of which is the weak impact of the "Covid-19" pandemic on the government's financial strength, which can be attributed to the effective government response in the battle against the global epidemic.

The stable outlook reflects balanced risks, consistent with the stable outlook for the strong sovereign rating of the Emirate of Abu Dhabi.

Among the most important points that the report focused on is progress and global leadership in the issue of vaccinations for the country, which the agency said will be reflected in supporting the economic recovery in a step that limits the effects of the epidemic on the UAE credit scales, according to the rating.

The agency indicated that the pace of recovery will vary in its recovery for the main sectors, and potentially, the trade and tourism sectors will recover faster than the area of ​​air transport for passengers.

As for the local and foreign currencies, there has been no change to remain within the (Aaa) classification, and for the classification of the local currency in the sovereign rating, it is a reflection of the UAE's predictable institutions and the durability of external accounting centers.

On the other hand, the foreign currency ceiling highlights the existence of very low risks in terms of transferring funds, due to the presence of large foreign exchange reserves in the Central Bank.

Like the rest of the world, the epidemic affected government revenues during the year 2020, leading to lower value-added tax receipts due to the decrease in the number of tourists and lower consumption. However, according to Moody's, the decrease was almost completely compensated for by reducing government spending and spending on social and other benefits. , So that the government's fiscal deficit is about 0.2% of GDP during 2020.

The agency shone positively on the UAE's ability to respond to shocks, as evidenced by its struggle against the "Covid-19" epidemic, as the Central Bank rushed to launch economic support with a stimulus package worth 100 billion dirhams, to later reach 256 billion dirhams (equivalent to 20% of GDP) ).

In addition to paying about 50 billion dirhams in financing facilities without an upfront cost to banks, to reschedule borrowers' loans affected by the epidemic, in addition to reducing liquidity reserves by up to 95 billion dirhams and others.

Moody's pointed out that the UAE was one of the first countries to introduce Corona virus vaccines, and provided them for free to residents and residents, to occupy the highest rates of vaccinations around the world.

In addition, another survey showed, the day before yesterday, that business conditions in the non-oil private sector in the UAE continued to improve in April, as the growth of new activities reached the highest level in 20 months, while the economy is recovering from the "Covid-19" pandemic. .

The revised IHS Market UAE PMI rose to 52.7 in April from 52.6 in March, the highest level since July 2019 and the fifth month in a row that the 50 threshold between growth and contraction has been crossed.

The trade and tourism sectors will recover faster than air passenger transport.

The agency affirms the UAE’s ability to respond to shocks, as evidenced by its struggle against “Covid-19”.

The UAE is one of the first countries to offer Corona vaccines, to have the highest vaccination rates in the world.

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