Fitch Ratings - London: Fitch Ratings has affirmed the United Arab Emirates' (UAE) Long-Term Issuer Default Ratings (IDRs) at 'AA-' with a Stable Outlook. A full list of rating actions is at the end of this rating action commentary.

The 'AA-' rating reflects the UAE's low consolidated government debt, strong net external asset position and high GDP per capita. It benefits from Abu Dhabi's (AA/Stable) sovereign net foreign assets (164% of UAE GDP in 2025), which are among the highest of Fitch-rated sovereigns. These strengths are balanced by weak governance indicators relative to rating peers, high geopolitical risk, the UAE's high dependence on hydrocarbon income and the significant leverage of government-related entities (GREs).

The Stable Outlook reflects the expected resilience of oil export revenues during the Iran war, which largely offsets the immediate negative impact of the war, as well as abundant fiscal and external buffers, and our expectation that individual Emirates will bear the cost of the war rather than the federal government.

Key Rating Drivers

Iran War Risks:  Fitch expects a gradual re-opening of the Strait of Hormuz from July. However, the course of the war is highly uncertain. There are significant risks of a renewed flare-up, which could include greater disruption to oil and gas exports due to damage to energy production, processing and transportation assets, as well as a prolonged closure of the Strait, both of which would weigh on the UAE's credit profile. The damage from the war on non-oil growth and economic diversification is unclear; the longer and more structural the deterioration in the regional security environment, the greater the adverse impact would be, which could challenge the sovereign balance sheet.

Resilient Hydrocarbon Revenue: Abu Dhabi's 2026 export revenues will be higher than our pre-war forecasts despite the disruption, as higher prices (USD87/bbl average in 2026) and exports via pipeline to Fujairah offset lower volumes through the Strait of Hormuz. Crude oil constitutes the bulk of exports, and we consider Abu Dhabi's oil export infrastructure less vulnerable to long-term damage than more concentrated and bespoke downstream oil or liquefied natural gas plants.

Economic Contraction: We project real GDP to shrink by 4.8% in 2026, with a 3.2% contraction in non-oil GDP and Dubai's GDP shrinking by close to 7%. Fitch expects Dubai's real GDP to remain below its 2025 level in 2027 as investments are delayed and tourism and expat inflows return only slowly. Fitch expects all the Emirates will put recovery programmes in place, but trend growth will not rapidly return to pre-war levels. Hydrocarbon GDP will contract by about 10% in 2026 and strongly rebound in 2027 with oil production no longer constrained by OPEC+ quotas.

Budget Surpluses: We estimate the consolidated budget of the UAE will remain in surplus in 2026 at 4.5% of GDP despite a near 20% rise in spending to mitigate the immediate impact of the war and our expectation of large post-war recovery programmes. Fitch expects surpluses in Abu Dhabi and Dubai and budget deficits in Ras Al Khaimah (A+/Rating Watch Negative) and Sharjah (not rated). We expect GRE spending to rise significantly for similar reasons.

Small FG: The federal government (FG) is small, with revenues and expenditure close to 4% of GDP. Its remit is centred on the provision of essential public services such as infrastructure, healthcare, education and immigration and security. It is required by law to balance its current budget (excluding capex) and has a record of broadly balancing the overall budget with intra-year adjustments of spending and contributions from emirates to adjust to shocks.

Moderate Consolidated Government Debt: Consolidated UAE government debt is forecast to rise to 27% of GDP in 2026, from 24.3% of GDP at end-2025, which was well below the 'AA' category median of 50.3%. Individual emirates have varied debt profiles. We project Abu Dhabi's debt will increase as it continues to show a preference for debt over asset drawdowns, Sharjah to borrow to fund deficits, the FG to build the yield curve while Dubai's debt will be flat.

High Economy-Wide Leverage: Fitch views the UAE as having high leverage in its economy. We estimate overall contingent liabilities from GREs of the emirates and the FG in 2024 at about 63% of UAE 2024 GDP. Based on publicly available data, a large share of state-owned enterprise debt is at healthy entities with little risk, but many do not disclose financial data.

Close Links with Abu Dhabi: We judge that close political and budgetary links, along with the strong influence of Abu Dhabi over the FG budgeting and the essential nature of public services it provides place the FG higher in Abu Dhabi's support hierarchy than individual emirates, should it be required. Abu Dhabi does not provide an explicit guarantee that would ensure unconditional and timely support to the FG but has significant ex-ante and ongoing controlling power over the FG's revenue and spending.

External Buffers: The Central Bank of the UAE data showed a 9% drop in FX reserves to USD277 billion in March 2026. In our view, the high starting point of FX reserves combined with the large amount of Abu Dhabi Investment Authority assets provide ample to buffers to maintain macro stability and we do not view discussions around a swap line with the US Fed as a sign of stress. We project a large drop in the current balance to 1.3% in 2026 from 10.6% in 2025.

Banks Resilient: UAE banks appear resilient under Fitch's base case for the war, reflecting sound financial metrics, and ample liquidity and capital buffers. Banks' Viability Ratings could face risks from asset-quality deterioration under an adverse scenario in which the Iran war has severe effects, with real estate lending the most likely source of stress.

ESG - Governance: The UAE has an ESG Relevance Score of '5[+]' for Political Stability and Rights and for the Rule of Law, Institutional and Regulatory Quality and Control of Corruption. These scores reflect the high weight that the World Bank Governance Indicators (WBGI) have in our proprietary Sovereign Rating Model (SRM). The UAE has a high WBGI ranking at the 70th percentile, reflecting its record of domestic political stability, strong institutional capacity, effective rule of law and a low level of corruption.

RATING SENSITIVITIES

Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade

- Structural: A prolonged deterioration in the security environment, which could include greater disruption to UAE's ability to export oil and gas due to significant damage to energy production, processing and transportation assets; or a prolonged closure of the Strait of Hormuz, which has a significant impact on the economy and public finances.

- Public Finances: Substantial erosion of fiscal and external positions, for example, due to a sustained decline in oil revenues, or a materialisation of contingent liabilities, which trigger a rise in sovereign borrowing or foreign asset sales.

- Public Finances: A deterioration in Abu Dhabi's sovereign credit profile.

Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade

- Public Finances: Further improvement of the UAE's consolidated balance sheet or increased fiscal flexibility at the FG level.

- Public Finances: Increased confidence that Abu Dhabi would provide unconditional support in the event of need, for example, due to a guarantee for the timely service of FG debt.

- Structural/Macro: Improvement in structural factors such as a reduction in oil dependence, a strengthening in governance and the economic policy framework, and a reduction in geopolitical risk while maintaining strong fiscal and external balance sheets

Sovereign Rating Model (SRM) and Qualitative Overlay (QO)

Fitch's proprietary SRM assigns the UAE a score equivalent to a rating of 'AA' on the Long-Term Foreign-Currency (LTFC) IDR scale.

Fitch's sovereign rating committee adjusted the output from the SRM to arrive at the final LTFC IDR by applying its QO, relative to SRM data and output, as follows:

- Structural: -1 notch to reflect high geopolitical risks, manifest by the ongoing Iran war, and the high reliance on hydrocarbons as a source of fiscal and external revenues relative to peers.

Fitch's SRM is the agency's proprietary multiple regression rating model that employs 18 variables based on three-year centred averages, including one year of forecasts, to produce a score equivalent to a LTFC IDR. Fitch's QO is a forward-looking qualitative framework designed to allow for adjustment to the SRM output to assign the final rating, reflecting factors within our criteria that are not fully quantifiable and/or not fully reflected in the SRM.

Debt Instruments: Key Rating Drivers

Senior Unsecured Debt Equalised: The senior unsecured long-term debt ratings are equalised with the applicable Long-Term IDR, as Fitch assumes recoveries will be 'average' when the sovereign's Long-Term IDR is 'BB-' and above.
No Recovery Ratings are assigned at this rating level.

Country Ceiling

The Country Ceiling for the UAE is 'AA+', two notches above its LTFC IDR. This reflects strong constraints and incentives, relative to the IDR, against capital or exchange controls being imposed that would prevent or significantly impede the private sector from converting local currency into foreign currency and transferring the proceeds to non-resident creditors to service debt payments.

Fitch's Country Ceiling Model produced a starting point uplift of +1 notch. Fitch's rating committee applied a further +1 notch qualitative adjustment to this, under the Balance of Payments Restriction pillar reflecting the UAE's fairly open capital account, which is not reflected by the high number of capital-account restrictions recorded in the IMF's Annual Report on Exchange Arrangements and Exchange Restrictions AREAER report that feed into the model score.

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

There is no disclosure on the size of Abu Dhabi's external assets (mostly relating to ADIA).

There is a degree of disclosure on the assets' composition and returns of ADIA's and Fitch is provided with some guidance on inflows and outflows. Fitch's estimates of Abu Dhabi's external assets are derived by compounding estimated government cash surpluses using assumptions about returns and asset allocations.

The mitigants above provide us with sufficient confidence in our analysis of the credit profile to maintain or assign the rating.

Climate Vulnerability Signals

The results of our Climate.VS screener did not indicate an elevated risk for the United Arab Emirates

ESG Considerations

The UAE has an ESG Relevance Score of '5[+]' for Political Stability and Rights as WBGI have the highest weight in Fitch's SRM and are therefore highly relevant to the rating and a key rating driver with a high weight. As the UAE has a percentile rank above 50 for the respective Governance Indicator, this has a positive impact on the credit profile.

The UAE has an ESG Relevance Score of '5[+]' for Rule of Law, Institutional & Regulatory Quality and Control of Corruption as WBGI have the highest weight in Fitch's SRM and are therefore highly relevant to the rating and are a key rating driver with a high weight. As the UAE has a percentile rank above 50 for the respective Governance Indicators, this has a positive impact on the credit profile.

The UAE has an ESG Relevance Score of '4' for Human Rights and Political Freedoms as the Voice and Accountability pillar of the WBGI is relevant to the rating and a rating driver. As the UAE has a percentile rank below 50 for the respective Governance Indicator, this has a negative impact on the credit profile.

The UAE has an ESG Relevance Score of '4[+]' for Creditor Rights as willingness to service and repay debt is relevant to the rating and is a rating driver for the UAE, as for all sovereigns. As the UAE has a record of 20+ years without a restructuring of public debt and captured in our SRM variable, this has a positive impact on the credit profile.

The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/topics/esg/products#esg-relevance-scores.

VIEW ADDITIONAL RATING DETAILS

Additional information is available on www.fitchratings.com

PARTICIPATION STATUS

The rated entity (and/or its agents) or, in the case of structured finance, one or more of the transaction parties participated in the rating process except that the following issuer(s), if any, did not participate in the rating process, or provide additional information, beyond the issuer’s available public disclosure.

APPLICABLE CRITERIA

  • Country Ceiling Criteria (pub. 24 Jul 2023)
  • Sovereign Rating Criteria (pub. 27 Apr 2026) (including rating assumption sensitivity)

APPLICABLE MODELS

Numbers in parentheses accompanying applicable model(s) contain hyperlinks to criteria providing description of model(s).

  • Country Ceiling Model, v2.0.3 (1)
  • Debt Dynamics Model, v1.3.3 (1)
  • Macro-Prudential Indicator Model, v1.5.0 (1)
  • Sovereign Climate Risk Model, v1.0.0 (1)
  • Sovereign Rating Model, v3.14.4 (1)

ADDITIONAL DISCLOSURES

  • Dodd-Frank Rating Information Disclosure Form
  • Solicitation Status
  • Endorsement Policy

ENDORSEMENT STATUS

United Arab Emirates

UK Issued, EU Endorsed

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Fitch’s international credit ratings produced outside the EU or the UK, as the case may be, are endorsed for use by regulated entities within the EU or the UK, respectively, for regulatory purposes, pursuant to the terms of the EU CRA Regulation or the UK Credit Rating Agencies (Amendment etc.) (EU Exit) Regulations 2019, as the case may be. Fitch’s approach to endorsement in the EU and the UK can be found on Fitch’s Regulatory Affairs page on Fitch’s website. The endorsement status of international credit ratings is provided within the entity summary page for each rated entity and in the transaction detail pages for structured finance transactions on the Fitch website. These disclosures are updated on a daily basis.

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