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S&P Global Ratings has affirmed its “BBB-“ long-term sovereign credit rating with a stable outlook for Sharjah.
The rating is based on S&P’s expectation that despite the emirate’s large fiscal deficits, the government debt will remain below 60 percent of the gross domestic product (GDP) through 2024.
The local economy fell sharply by about 10 percent in real terms last year, while government revenues also plunged. This has resulted in elevated fiscal deficits.
In a report on Sunday, S&P said it has also assigned a “A-3” short-term rating to Sharjah.
It expects the emirate’s economic growth to rebound by four percent in 2021, and growth to average around two percent a year from 2022 to 2024.
Changes in ratings
S&P said Sharjah’s credit ratings could be raised if government borrowings or debt-service costs fall materially, reversing the current rising trends.
“However, we view this as unlikely over the next two years,” S&P said.
In a downside scenario, the ratings could be lowered if the government’s fiscal position deteriorates further.
Sharjah’s economy is considered well diversified compared to other sovereigns in the Gulf Cooperation Council (GCC) region. It enjoys high wealth levels and advantages as part of the UAE, including low external financing risks and the potential for monetary support from the federation.
“However, the emirate’s political institutions are at a nascent stage of development relative to peers in the same rating category and it has a weak fiscal position from a low revenue base and elevated deficits,” S&P.
Also weighing on the ratings is the underdeveloped local currency domestic bond market.
(Writing by Cleofe Maceda; editing by Seban Scaria)
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© ZAWYA 2021
