UAE rated high for investors despite Dubai property fiasco

The United Arab Emirates has a clean bill of financial health with a higher than expected rating of economic strength and stability by Moody’s, the currency and bond rating agency.

The UAE was given an Aa2 rating with a stable outlook despite billions of pounds of pent up toxic debts, mainly concentrated in Dubai residential and commercial developments.

The UAE consists of seven states: Abu Dhabi, Dubai, Sharjah, Ajman, Umm al-Quwain, Ras al Khaimah and Fujairah. Abu Dhabi is the capital.

Abu Dhabi oil and gas reserves shore up weaker emirates

Moody’s annual report on Abu Dhabi states the agency stands fully behind the government and considers the UAE to have a high economic strength based on Abu Dhabi’s extensive oil and gas reserves and overseas financial holding.

Oil reserves alone are estimated at 140 billion barrels.

Moody’s also considers the risk of domestic political upheaval low given the country’s long history of internal stability; the volatile regional political environment is of some concern.

Moody’s calls for more fiscal transparency for offshore investors

The main criticism of the UAE economy was the low level of transparency for outside investors looking at financial and business data held by government owned companies.

“Moody’s assesses the UAE’s government financial strength as similar to highly developed economies like Sweden, Australia, or Germany,” said the report.

With low debt, political stability and a strong economic balance sheet, Moody’s feels the UAE present good opportunities for investors that can only improve if the government moves to make financial affairs more open to outsiders.

This would include more details of government assets and creditors plus more public information about internal financial affairs of the emirates. Currently, it would appear the UAE is economically powered by Abu Dhabi - especially as the government has bailed out the Dubai property market fiasco with a $10 billion loan.

Fiscal transparency would allow investors to make informed decisions and avoid future problems like the plummet in Dubai property prices.