Structural strengths will support the resilience of the UAE’s non-oil economy to the US-Iran war, but a persistent period of regional insecurity will call into question logistical advantages and perceptions of the country as a commercial and financial centre and tourism destination, according to Fitch Ratings.

The non-oil growth model of the UAE has leveraged a role as a hub between Asia and Europe backed by a favourable operating environment, supportive government policy, and the ability to attract and retain foreign labour and visitors.

Fitch expects further measures to improve the operating environment along with a smoothing of administrative procedures for corporates and residents. 

These will be backed by higher spending and other sources of financial support at the sovereign and government-related entity level, and the prospect of the mobilisation of large pools of sovereign capital via entities with a local presence.

However, the war threatens other strengths, with disruption to the Strait of Hormuz complicating logistics and security risks damaging the UAE’s attractiveness for foreign companies and residents. The UAE’s reliance on foreign workers is a key vulnerability for its non-oil growth model.

Under our baseline, the non-oil economy will contract by 3.7% in real terms in 2026 and then grow by 6.1% in 2027 and 4.3% in 2028, well below the 2022-2025 average. Pressures would mount in an adverse scenario.

The ratings of the UAE (AA-/Stable) and Abu Dhabi (AA/Stable) are underpinned by the latter’s exceptional strong balance sheet. They appear resilient to developments in the non-oil economy given its light taxation. For Ras Al Khaimah (A+/Negative), the pressures are greater as anticipated improvements to growth and fiscal metrics are heavily dependent on tourist arrivals.