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S&P affirms Sharjah’s ‘A/A-1’ rating on strong economy

Global credit rating agency Standard & Poor’s has affirmed the Emirate of Sharjah’s A/A-1 sovereign credit ratings long- and short-term, foreign and local currency, on the basis of Sharjah’s strong economic growth and the government’s solid fiscal management. The rating agency also confirmed that it expected Sharjah’s economic growth to continue.

S&P gave its first ever sovereign credit rating for Sharjah in January, rating the emirate ‘A/A-1? with a stable outlook. Moody’s Investors Services also assigned its first sovereign rating to Sharjah this year as A3 with a stable outlook.

S&P noted that it expects Sharjah’s nominal growth to remain strong, averaging about 8% in 2014-2017 balancing government interest burden, which the rating agency anticipates will keep the emirate relatively stable over the same period. The UAE’s Ministry of Economy recently confirmed that Sharjah’s gross domestic product (GDP) grew by 8 percent last year, in comparison with the UAE’s overall GDP growth of 4.8%.

Taking into account Sharjah’s current GDP growth and factoring in consumer price inflation, the agency stated that Sharjah’s real economic growth could be estimated at about 6 percent for this year, which is high when compared with peers with similar wealth. The estimated real per capita GDP growth, which is S&P’s weighted average for the 2008-2017 period, stands at 4%. Meanwhile, S&P estimates the emirate’s relatively high GDP per capita at US$27,000 (AED 99,000) for 2014.

Sharjah is a significant contributor to the UAE’s diversification away from oil revenues and is the only economy in the Middle East region with no single sector contributing to more than 20% of its GDP. According to S&P, the four largest sectors in the economy are real estate and business services accounting for about 20%; manufacturing 16%; mining, quarrying, and energy 13%; and wholesale and retail trade 12%.

In September, Moody’s assigned a rating of A3 to the Government of Sharjah’s debut sovereign Islamic bond issue or sukuk, supported by the government’s credit strength, fiscal policy and strong debt position. According to banking sources, the demand for the 10-year US$ 750 million (AED 275b) sovereign sukuk topped US$7.85 billion (AED 29b).

The Sharjah government has a wide range of initiatives in place to help develop its economy and brought together government decision makers earlier this month to discuss how to best meet the needs of business investors. Sharjah will also hold the 12th annual World Forum for Foreign Direct Investment next year from 7 – 10 February, hosted by Sharjah Investment and Development Authority (Shurooq).

Source: S&P, Moody’s, Shurooq

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