The UAE’s strong financial buffers will help it handle oil disruptions amid regional tensions, according to S&P.
Dubai: A new assessment by S&P Global Ratings highlights the structural strengths that help shield the UAE economy from geopolitical shocks.
The agency said the UAE’s large fiscal and external buffers provide room for policy manoeuvring during adverse geopolitical developments or unfavourable hydrocarbon sector dynamics, including potential disruptions to oil production or exports.
1. Huge financial reserves
The UAE holds exceptionally large government assets. S&P Global Ratings estimates that the country’s consolidated net asset position will reach about 184 per cent of GDP in 2026, while government liquid assets are projected at roughly 210 per cent of GDP.
“Our ratings on the UAE remain supported by the government’s strong fiscal and external positions,” S&P said. The agency added that the “exceptional strength of the government’s consolidated net asset position… provides a significant fiscal, external and economic buffer against external shocks.”
These reserves serve as a financial buffer, helping the UAE absorb shocks if geopolitical tensions disrupt energy markets or global trade.
2. Low government debt
The UAE maintains relatively low public debt compared with many advanced economies. S&P Global Ratings estimates that general government debt will be around 27 per cent of GDP in 2026.
“The UAE’s general government debt is very low,” the agency said. Low borrowing levels give policymakers room to increase spending, support the economy, or stabilize markets if external shocks occur.
3. Controlled spending
Government finances have remained strong in recent years. S&P Global Ratings says the UAE’s budget recorded an average surplus of 5.6 per cent of GDP between 2021 and 2025.
In other words, the government earned more revenue than it spent during this period. This financial cushion gives authorities additional room to support the economy if geopolitical tensions disrupt markets or trade.
4. Non-oil growth
While oil remains a major part of the UAE economy, it no longer dominates overall activity. S&P notes that non-oil sectors now account for about 75 per cent of GDP, helping the economy withstand volatility in global markets.
The agency added that the size of the non-oil economy strengthens the UAE’s ability to absorb shocks linked to energy markets or geopolitical developments.
5. Stable investments
Government investments further bolster the UAE’s financial resilience. S&P Global Ratings noted that government investment vehicles and sovereign wealth funds play a key role in maintaining financial stability.
Major UAE state investment funds include the Abu Dhabi Investment Authority, Mubadala Investment Company, ADQ, Investment Corporation of Dubai, and Emirates Investment Authority.
These institutions manage global portfolios and generate revenue beyond the oil sector, providing an additional layer of financial buffers for the economy.
6. Sound banking sector
The UAE’s banking system has shown strong financial health in recent years. According to S&P Global Ratings, the sector has demonstrated “strong resilience and financial soundness over the past few years.”
The agency expects lending activity to continue expanding. “We expect solid loan growth to continue in 2026–2027, supported by ample liquidity in the banking system amid expected monetary policy easing,” S&P said.
Banks are also likely to benefit from the ongoing expansion of the non-oil economy over the next 12–24 months.
Bottom line
S&P Global Ratings affirmed the UAE’s ‘AA/A-1+’ sovereign credit ratings with a stable outlook, highlighting that strong financial buffers give policymakers the ability to respond if regional tensions disrupt energy markets or trade.
The stable outlook reflects S&P’s view that the UAE’s sizable fiscal and external buffers provide room for policy maneuvering during adverse geopolitical developments, including potential disruptions to oil production or exports.
