(MENAFN) Moody's Investors Service has affirmed the UAE's 'Aa2' long-term local and foreign currency issuer ratings with a "stable outlook" owing to the country's strong efforts to diversify its economy and promote non-oil sector growth. The 'Aa' rating indicates a high-quality credit profile with very low credit risk.

Moody's report on Tuesday stated that the rating affirmation was based on the expectation that the UAE federal government's debt level will remain very low due to its adherence to balanced budget targets and limited spending needs resulting from the scale of fiscal decentralisation within the country.

The stable outlook reflects the UAE government's measures to expand non-hydrocarbon revenue, promote non-oil sectors' development, and attract foreign businesses and talent. The country's economy grew by 7.6% in 2022, the highest growth in 11 years, and is projected to continue this trend, as business activity in the UAE's non-oil private sector economy grew at its strongest pace in four months in February.

The Ministry of Finance reported that UAE government revenue rose by about 7% to Dh143.1 billion ($39 billion) in the fourth quarter of 2022. Moody's expects the government to maintain balanced budgets even as it increases spending from a narrow base. The rise in expenditure will be supported by a corresponding increase in revenue due to the expected growth in non-hydrocarbon economic activity, higher collection of value-added tax, and increased collection of services fees resulting from the ongoing inflow of businesses, expatriates, and digital nomads.

Overall, Moody's affirmed the UAE's rating due to its commendable efforts to boost non-oil sector growth and promote economic diversification, leading to a strong fiscal position with a low debt level and balanced budgets.

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