UAE – Mubasher: Capital Intelligence Ratings (CI Ratings), a leading global credit rating agency, has affirmed the UAE’s long-term foreign currency rating (LT FCR) and long-term local currency rating (LT LCR) at 'AA-', with a stable outlook.

The GCC state's short-term foreign currency rating (ST FCR) and short-term local currency rating (ST LCR) have been also confirmed at 'A1+', CI Ratings revealed in a statement.

“The ratings reflect the continued strength of the country's external position which is characterised by the availability of substantial financial assets. The ratings are also supported by sound public finances, the stable domestic political situation, and a high GDP per capita,” the agency said.

The credit rating agency expected the UAE's sovereign ratings to remain unchanged over the coming 12 months.

However, the ratings could be upgraded in a year's time in case the UAE government initiated structural reforms to cut its dependency on oil exports and enhance the institutional framework, or if geopolitical tensions calm down, CI Ratings added.

On the other hand, the ratings could be downgraded if geopolitical tensions escalate, global oil prices fall sharply, or if the state’s public and external finances deteriorate, the agency noted.

The UAE's current external accounts are likely to post a surplus of around 5.1% of gross domestic product (GDP) in 2019 to 2021, after reporting a strong surplus of nearly 6.6% of GDP in 2018.

The agency also projected the country’s real output growth to rise by an average of 3.1% in 2019-2021 on the back of the government’s infrastructure spending ahead of Dubai 2020 World Expo.

The escalating geopolitical tensions in the region, including the US imposition of full sanctions on Iran, could weigh on the UAE’s outlook.

Moreover, CI Ratings expected the nation’s inflation to ease to an average of 2.1% in 2019-21 after it rose to 3.1% in 2018 following the introduction of a 5% value-added tax (VAT) rate.