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Ras Al Khaimah’s GDP growth is expected to average 2.7% annually from 2022-2025 with continued fiscal surpluses to support a government net asset position of nearly 13% of GDP by 2025.
Affirming its credit rating of A-/A-2; outlook stable, S&P said the emirate has relatively strong growth prospects on the back of higher domestic and regional demand, but, real GDP per capita growth will remain below the average for sovereigns at a similar level of economic development.
The ratings agency said the stable outlook reflects expectations that the Ras Al Khaimah (RAK) government will maintain its prudent fiscal stance over the next two years.
The agency projected that RAK’s real GDP will expand 2.8% this year, following an estimated 3.0% in 2021 and a 4.4% contraction in 2020.
In a research update, the agency said it could raise the ratings over the next two years if RAK’s economic prospects materially strengthen, but its downside scenario is that ratings could be lowered if the government’s strong fiscal position deteriorates, for example, if weaker-than-expected economic activity leads to persistent budgetary deficits and an accumulation of government debt.
“We could also lower the ratings if debt-service costs significantly increase,” the agency said.
Russia-Ukraine war
The Russia-Ukraine conflict has had some spillover effects on RAK, with ammonium nitrate shortages affecting quarrying output, a halt to flights from Russian airlines such as Rossiya, S7, and Ural to the emirate’s airport, and lower tourist arrivals from Russia (comprising about 7% of total arrivals), the report said.
In addition, mining companies and ports largely absorbed the negative effects of higher hydrocarbon prices until a new fuel surcharge was implemented in May.
“That said, real estate sales linked to the tourism, commercial, and industrial sectors showed strong growth in first-half 2022,” the update added.
The emirate announced a $136 million tourism spending spree last year.
(Writing by Imogen Lillywhite; editing by Seban Scaria)
