Moodys warns of fiscal buffers erosion if prudent beugeting not maintained
Prolonged period of lower oil prices could send Abu Dhabis fiscal deficit to 14 per cent of its gross domestic product (GDP) in 2016, warned rating agency Moodys in a note released on 16 February.
Moodys 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.
Moodys said the emirate must maintain a prudent budgeting policy or it risks eroding its fiscal buffers.
The firm further expects Abu Dhabis 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, Moodys 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 Dhabis foreign assets, held primarily by the Abu Dhabi Investment Authority (Adia), at $502bn at end 2014.
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