In a sovereign rating that is the strongest of its kind in the region, the UAE government has been awarded a rating of ” AA2“In the creditworthiness of the international rating agency” Moody’s “, with a stable outlook for the national economy.
According to an assessment released by the agency yesterday, Moody’s said that there are several factors that support the classification, one of which is the muted impact of the Covid-19 health pandemic on the government’s financial strength, which can be attributed to the effective government response in the battle against the global epidemic. The stable outlook reflects the existence of balanced risks, consistent with the stable outlook for the strong sovereign rating of the Emirate of Abu Dhabi.
One of the broad lines highlighted by the rating is the progress and global leadership in the issue of vaccinations for the country, which the agency said will be reflected in supporting the economic recovery in a step that limits the effects of the epidemic on the UAE credit scales, according to the rating.
The agency said that the pace of recovery will differ in its recovery for key sectors, but it is possible that the trade and tourism sectors will recover faster than air transport for passengers.
As for the local and foreign currency, there was no change to remain within the classification Aaa As for the classification of the local currency in the sovereign rating, it is a reflection of the UAE’s predictable institutions and the durability of external accounting centers.
On the other hand, the foreign currency ceiling highlights the existence of very low risks in terms of transferring funds, due to the large foreign exchange reserves at the Central Bank, not to mention Moody’s belief that Abu Dhabi could use the wealth fund’s assets to support the exchange rate if needed.
And like the rest of the world, the impact of the epidemic on government revenues in 2020, leading to a decrease in value-added tax receipts due to the decrease in the number of tourists and the decrease in consumption. However, according to Moody’s, the decrease was almost completely compensated for by reducing government spending and spending on social and other benefits, to reach the deficit. The government finances is only about 0.2% of GDP in 2020.
The IAEA has positively highlighted the UAE’s ability to respond to shocks, as evidenced by its struggle against the Covid-19 epidemic. Where the Central Bank rushed to launch economic support with a stimulus package worth 100 billion dirhams, to later reach 256 billion dirhams (equivalent to 20% of GDP). In addition to paying about 50 billion dirhams in financing facilities at no cost to banks to reschedule the loans of borrowers affected by the epidemic. In addition to reducing liquidity reserves of up to 95 billion dirhams, among others.
“Moody’s” agency pointed out that the UAE was one of the first countries to introduce Corona virus vaccines, and provided them for free to residents and residents, to have the highest vaccination rates around the world.
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