London: Abu Dhabi’s economy remained heavily dependent on oil, which accounts for around 50% of GDP and the bulk of fiscal and external revenues, according to Fitch Ratings.
“Spending of oil revenues is a key driver of the non-oil economy. However, oil production per capita is one of the highest in the world and supports high GDP per capita. Proven oil reserves are large, production costs are low and production capacity and downstream facilities are being expanded,” Fitch in a statement said.
Structural indicators are mixed relative to peers. GDP per capita is the second-highest of all Fitch-rated sovereigns, but human development indicators are below the median. The World Bank Doing Business score and most World Bank governance indicators (last updated with 2012 data in September 2013) have improved in recent years and are in line with the peer median, although voice and accountability is weak. The World Bank ranks political stability above the peer median and the political scene is stable. Fitch considers geopolitical risks to be elevated compared with some ‘AA’ rated peers.
“Economy policymaking tools, primarily at the federal level, are weak compared with peers, although steps to develop the policy framework continue. A macro-fiscal unit has been established at the Department of Finance and use of macro-prudential tools has increased. Nonetheless, Abu Dhabi is primarily dependent on its fiscal and external buffers to absorb shocks. The US dollar peg constrains interest rates at or near US levels, which are increasingly negative in real terms,” Fitch in a statement added