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Country Risk Service United Arab Emirates Updater

  • ID: 2101604
  • July 2016
  • Region: United Arab Emirates
  • 20 Pages
  • The Economist Intelligence Unit
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Although the UAE has made progress in debt restructuring since the 2009 Dubai debt standstill and has large sovereign wealth fund assets, its debt-financing needs remain substantial, weighing on the rating. Continued low oil prices will keep the fiscal balance in deficit in 2016-17, leading to a rise in domestic and external borrowing, and will dampen export revenue and economic growth.

The UAE dirham will be susceptible to fluctuations in the US dollar, to which it is pegged, amid concerns over capital outflows and a move to a negative position for commercial banks' foreign assets. The strengthening dollar raises the question of whether the peg will undermine competitiveness, but there is little risk of the dirham being de-pegged. The continued weakness of oil prices will push the current account into deficit in 2016.

Bank profits and financial soundness indicators had improved until recently, but lower oil prices are squeezing liquidity, hurting profitability and causing the government to run down its deposits. The government will encourage consolidation to boost the lending power of the banks. Increased use of debt financing by the government should ease these pressures. Banks also face still-high debt exposure to government-related entities.

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Country Risk Service United Arab Emirates Updater

Risk assessment
Sovereign risk
Currency risk
Banking sector risk
Political risk
Economic structure risk

Definitions
Sovereign risk
Currency risk
Banking sector risk
Political risk
Economic structure risk
Overall country risk

Central scenario for 2016-20: Political stability

Central scenario for 2016-20: Election watch

Central scenario for 2016-20: International relations

Central scenario for 2016-20: Policy trends

Central scenario for 2016-20: Fiscal policy

Central scenario for 2016-20: Monetary policy

Central scenario for 2016-20: Economic growth

Central scenario for 2016-20: Inflation

Central scenario for 2016-20: Exchange rates

Central scenario for 2016-20: External sector

Key risk indicators

Ratings summary

Quarterly indicators

International assumptions summary

Economic structure

Public finances

Exchange rates, interest rates and prices

Financial sector

Current account

International liquidity

Foreign payment and liquidity indicators

External trade

External financing requirement

External debt stock

External debt service

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