StandardAndPoors revises Ras-exel-Khaimé economy forecasts to positive | Newspaper Al Khaleej

Dubai: Standard & Poor's International has upgraded its outlook for the emirate of Ras Al Khaimah from stable to positive. The agency has affirmed its long-term and short-term foreign and local currency credit ratings for Ras al-Khaimah at 'A-/A-2'.

The positive outlooks reflect the agency's view that Ras Al Khaimah's economy is poised to outperform current expectations due to planned construction projects in the emirate, as well as indirect effects on Ras Al Khaimah's mining sector from investments in the UAE as well as other countries in the Arab Cooperation Council and the Indian Peninsula. The positive outlook also reflects improved economic growth in Ras Al Khaimah. The agency said gross domestic product growth could be supported by strong activity in the tourism sector, including the Zahama resort on Wain Island.

The agency also expects Ras Al Khaimah's mining sector, as well as free economic zones, real estate, and ports, to benefit from strong oil and non-oil growth and infrastructure investment in the UAE, the Arab Cooperation Council, and the Indian Peninsula. The revision to the forecasts also reflects our expectation that Ras Al Khaimah will continue to show strong financial performance, characterized by the government's net assets and financial surpluses that were maintained during the pandemic.

The agency forecasts that real gross domestic product growth will average around 4% over the next four years, compared to 2.6% between 2012 and 2021. The hospitality sector accounts for only 4% of the total gross domestic product, but this share is expected to increase with the launch of new projects. About 22 new hotels are planned to open over the next five to six years, leading to an expected 90% increase in hotel rooms. Zahama Resort is one of the largest tourism projects. It is scheduled to open in early 2027 and will include the first amusement park in the Gulf region. The 5.6 million square foot project on Wain Island is expected to cost $3.9 billion or about 30% of Ras Al Khaimah's total gross domestic product.

In addition to diversifying tourism offerings, we expect it to also increase government revenues and have a broad secondary effect on local companies supplying construction materials as well as the real estate sector, ports, airports and free economic zones.

In September, the UAE government set up a federal organization to regulate the gaming industry, and Ras al-Khaimah is likely to receive the first license to operate "Win".

The agency also predicts stronger prospects for the mining sector in Ras Al Khaimah. Accelerating construction projects in the UAE, Kuwait, India and Bangladesh will lead to strong demand for mining products in the medium term. Stephen Rock, one of the largest limestone mining companies in the world and wholly owned by the government of Ras Al Khaimah, is supplying stone for major projects in the UAE. Major contracts include the construction of artificial islands for Abu Dhabi National Oil Company's Gasha gas project, a rail line from the Al Gail quarry in Ras Al Khaimah to Abu Dhabi as part of the construction of the UAE's national rail network, and real estate development on Jebel Ali Island in Dubai.

The agency considers Ras Al Khaimah's economy to be more diverse than most of its neighbors in the Arab Cooperation Council countries. There is no single economic sector that predominantly drives economic activity, as it includes manufacturing, wholesale and retail trade, and the construction/real estate and mining sectors, which together account for about 50% of total gross domestic product. The remaining 50% is made up of a variety of sectors.

In addition, the agency points out that Ras Al Khaimah has historically maintained a conservative financial policy characterized by constant financial surpluses and net assets. The agency forecasts that the emirate will reach a government financial surplus of 1% of gross domestic product in 2023. However, this wise financial position may be tested in the period leading up to the development of Vine Island and the opening of the Vine Resort due to the requirement for large capital investment.

Major development projects include housing, roads and other infrastructure not covered by federal funding, information technology services, and expansion of the Ras Al Khaimah Economic Zone (Rakez). We anticipate that a significant portion of these costs will be funded by revenues from the sale of land on Vine Island, which will impact revenues as the property bonds are transferred over the next two or three years. Consequently, we expect the government to maintain a small fiscal surplus of around 0.7% of gross domestic product between 2023 and 2026, compared to an average of 2.0% over the past five years.

We also expect economic expansion to continue, leading to higher revenues from VAT, indirect taxes and gains from state-owned enterprise (GRE) shares. Dividends from public investments are expected to remain stable over the forecast period, averaging about 0.6% of gross domestic product, corresponding to 7% of total financial income.