Fitch sees UAE non-oil economy resilient but exposed to war risks

what happened

Newsmetry API, citing ZAWYA, reports that Fitch Ratings expects the UAE’s structural advantages to help its non-oil economy withstand the US-Iran war. A prolonged period of regional insecurity could nevertheless undermine the country’s logistical edge and weaken its image as a commercial and financial centre and tourism destination.

The UAE’s growth model is built on its position as a link between Asia and Europe, a favourable business environment, government support, and the ability to attract and retain overseas workers and visitors. Fitch anticipates additional steps to improve operating conditions and make administrative procedures easier for companies and residents. Higher spending and other financial support from the sovereign and government-related entities, together with the possible deployment of large sovereign funds through locally present entities, would provide further backing.

The conflict also threatens those advantages. Disruptions in the Strait of Hormuz could make logistics more difficult, while security concerns may reduce the UAE’s appeal to foreign businesses and residents. Dependence on expatriate workers remains a weakness of the non-oil model. Fitch estimates that the sector will shrink by 3.7% in real terms during 2026, before expanding 6.1% in 2027 and 4.3% in 2028, below its 2022-2025 average.

Risks would intensify under a more adverse scenario. The UAE’s AA-/Stable and Abu Dhabi’s AA/Stable ratings are supported by Abu Dhabi’s exceptionally strong balance sheet and appear resilient to non-oil economic developments because taxation is light. Ras Al Khaimah, rated A+/Negative, faces greater pressure because its expected growth and fiscal improvement depend heavily on tourist arrivals.

why it matters

For markets, the key issues are potential disruption to flows through the Strait of Hormuz and Ras Al Khaimah’s tourism exposure, while Abu Dhabi’s balance sheet remains a stabilising factor.

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