Prolonged period of lower oil prices could send Abu Dhabi’s fiscal deficit to 14 per cent of its gross domestic product (GDP) in 2016, warned rating agency Moody’s in a note released on 16 February.

Moody’s estimates is higher compared to the 11.6 per cent deficit predicted by Fitch for 2016.

Both estimates would place the deficit within the region of $26-31bn.

Moody’s said the emirate must maintain a prudent budgeting policy or it risks eroding its fiscal buffers.

The firm further expects Abu Dhabi’s real gross domestic product (GDP) to grow by 3.1 per cent in 2016, down from 3.5 per cent recorded in 2015.

”The non-oil economy and expanding oil sector have so far allowed Abu Dhabi to avoid a recession, but lower government spending on infrastructure projects is likely to dampen non-oil growth,” Moody’s said.

The firm, however, said that the emirate will be able to finance its fiscal deficits even if oil prices fall further for five to 10 years by liquidating assets.

Fitch estimates Abu Dhabi’s foreign assets, held primarily by the Abu Dhabi Investment Authority (Adia), at $502bn at end 2014.