Abu Dhabi government debt accounts for 2.7 percent of GDP

28 Jan 2015

(MENAFN) According to Moody’s Investors Services, Abu Dhabi’s government currently represents 2.7 percent of its GDP, while the total value of its debt represents 40.5 percent, or about USD105 billion including the debt related to government-related institutions, such as Abu Dhabi National Oil Company (Taqa) and Ipic, Emirates 24/7 reported.

“We expect that resources accumulated during years of high oil prices, and a prudent budgeting of oil proceeds, will mitigate the negative consequences of oil price volatility on Abu Dhabi’s fiscal and external accounts,” Moody’s said.

The emirate has a sizeable stock of offshore assets in its off-budget investment vehicles, including in the Abu Dhabi Investment Authority, Abu Dhabi Investment Council, International Petroleum Investment Company (Ipic) and Mubadala, with the value of these investments are expected to help with any liabilities placed on its economy in case the period of low oil prices is prolonged.

Moody said that it expects that the government will be able to finance fiscal deficits for several years if it liquidates these assets, adding that the sovereign wealth fund Abu Dhabi Investment Authority (Adia) alone holds an estimated USD498 billion in assets as of 2014.

The ratings agency said that while the drop in oil prices will likely cause Abu Dhabi’s economic growth to slow in 2015 and put an end to four consecutive years of double-digit fiscal surpluses, the emirate’s sizeable stock of foreign assets will help deal with the impact of lower oil revenues in the coming years.

The agency added that it predicts that the emirate’s GDP will slow to below 3 percent in 2015 from an estimated 4.1 percent in 2014, while its government’s fiscal deficit is estimated at 1.1 percent of GDP for 2015 after years of registering large surpluses.