UAE set for fiscal surplus even as spending rises amid war

The UAE is expected to maintain a budget surplus in 2026 despite a substantial increase in spending to cushion the immediate impact of the Iran war, according to Fitch Ratings.

The ratings agency expects the emirate’s fiscal surplus to be 4.5 percent of GDP, as expenses rose 20 percent amid the regional conflict that began on February 28.

Fitch reaffirmed the UAE’s long-term issuer default rating at “AA-” with a stable outlook, citing low consolidated government debt, a strong net external asset position and high GDP per capita.

The stable outlook reflects the expected resilience of oil export revenue during the war, which largely offsets the immediate negative impact, and the presence of large fiscal and external buffers.

Fitch expects individual emirates will bear the cost of the war rather than the federal government.

Abu Dhabi’s 2026 export revenues will be higher than the rating agency’s pre-war forecasts despite the disruption, as oil prices have averaged $87 per barrel this year and exports via pipeline to Fujairah offset lower volumes through the Strait of Hormuz.

State energy company Adnoc said earlier this month that it was fast-tracking the construction of a pipeline that will allow it to double the amount of oil it exports without using the strait. It already operates a 1.5 million barrels per day (bpd) pipeline to the east coast.

Further reading:

• Dubai set for swift rebound if conclusive peace achieved
• A Dubai property launch party in the shadow of war
• Dubai property sellers slashing millions off prices

The announcement came after the UAE said it planned to ramp up oil production and would quit the Organization of the Petroleum Exporting Countries (Opec) after almost 50 years.

Fitch projects the UAE’s real GDP — the inflation-adjusted value of all goods and services in a year — to shrink 4.8 percent in 2026, while non-oil GDP is expected to contract by 3.2 percent.

Dubai’s GDP is forecast to shrink nearly 7 percent this year, while real GDP is expected to remain below its 2025 level in 2027 as investment and the return of tourism and expat inflows remain slow.

Fitch expects all the emirates to implement recovery programmes, but trend growth will not return to pre-war levels quickly.

Hydrocarbon GDP will contract by about 10 percent in 2026 but strongly rebound in 2027 with oil production no longer constrained by Opec+ quotas, it said.