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Fitch Ratings affirmed the emirate of Ras Al Khaimah's (RAK) long-term foreign-currency issuer default rating (IDR) at 'A' with a stable outlook.
Fitch’s affirmation of the rating reflects its expectation that the pandemic shock will not have a lasting impact on RAK's fiscal position, which has significantly improved over the past five years.
The ratings agency expects economic activity to contract by 6.4 percent in real terms this year due to the global recession, which will weigh on the large export-driven manufacturing sector (26 percent of GDP) and the mining and quarrying sector (5 percent of GDP).
“Barring a second wave of lockdowns globally, we expect the economy to rebound by 5.5 percent in 2021 but GDP will remain below the end-2019 level,” Fitch said.
Fitch also expects RAK's consolidated budget to post a small deficit in 2020, the first since 2012 and tax revenue to drop by 33 percent.
State-owned enterprises (SOEs) are forecast to see a 20 percent drop in revenue in 2020. The ratings agency also expects the debt of the government and its SOEs to reduce slightly to 16.1 percent of GDP in 2020 and to drop to 15.1 percent in 2021 on the renewed surpluses and higher GDP.
“We expect RAK to maintain a prudent fiscal stance and debt/GDP to continue its downward trend,” Fitch said.
(Writing by Gerard Aoun, editing by Seban Scaria)
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