Moody's Ratings affirmed the UAE's Aa2 long-term sovereign rating with a stable outlook on 14 June 2026, despite forecasting a 7% real GDP contraction for the year.
The agency maintained the UAE's foreign-currency senior unsecured debt rating and medium-term note program at Aa2, while keeping both local- and foreign-currency country ceilings at Aaa.
Resilience amid disruption
Moody's attributed the affirmation to the UAE's financial buffers, low federal debt, and diversified economy, even as disruptions to trade through the Strait of Hormuz weigh on activity.
The report noted that hydrocarbon production is expected to decline by 23 percent in 2026, while the non-hydrocarbon sector is projected to contract by 4 percent due to trade disruptions and weakened confidence.
Higher oil prices—forecast to average between $90 and $110 a barrel—are expected to partially offset lower export volumes.
Regional contrasts
Across the Gulf, Moody's latest assessments show varying degrees of resilience: Qatar retained its Aa2 rating with a stable outlook, Saudi Arabia was affirmed at Aa3, Kuwait kept its A1 rating, and Bahrain's B2 rating carries a negative outlook.
The assessment assumes full financial support from Abu Dhabi to the federal government if required, supported by Abu Dhabi's government financial assets exceeding 300 percent of the emirate's GDP at the end of 2025.
The UAE can bypass the Strait of Hormuz for some oil exports through the Habshan-Fujairah pipeline, adding to its strategic flexibility.
The federal government recorded an estimated budget surplus equivalent to 0.8 percent of GDP in 2025, while federal debt remains at about 3 percent to 4 percent of GDP.
Moody's projects economic growth will rebound to 13 percent in 2027 as trade flows resume and non-hydrocarbon activity recovers.
Tourism, real estate, logistics, transport, and foreign investment are expected to face pressure from weaker confidence and interrupted connectivity.
Frequently asked questions
Why did Moody's keep UAE's rating at Aa2?
Moody's cited strong fiscal buffers, low federal debt (3‑4% of GDP), and progress in economic diversification as reasons for maintaining the Aa2 rating despite the 2026 GDP contraction forecast.
What is UAE's projected 2026 GDP contraction?
Moody's forecasts a 7% real GDP contraction for the UAE in 2026, driven by disruptions in the Strait of Hormuz and a 23% decline in hydrocarbon production.
How does UAE's rating compare to Gulf nations?
Both Qatar and the UAE retain an Aa2 rating with a stable outlook, Saudi Arabia is at Aa3, Kuwait at A1, and Bahrain at B2 with a negative outlook.
When will UAE's economy recover post‑2026?
Moody's projects the UAE’s economy to rebound with a 13% GDP growth in 2027 as trade flows resume and non‑hydrocarbon sectors recover.
What non‑oil factors affect UAE's economy?
Tourism, real estate, logistics, transport, and foreign investment are expected to face pressure from weakened confidence and disrupted trade connectivity.
