Economy

RAK outlook upgraded as hotel building steps up

October 16, 2023, 1:49 PM

Tourists in the Al Wadi desert. Tourism and renewables will remain 'major diversification engines' in the GCC economies

S&P points to tourism as driver of growth
Ratings agency tips fiscal surpluses to rise
20 RAK hotels to open over next 5-6 years

Ras Al Khaimah’s tourism and infrastructure projects, including the $3.9 billion Wynn Al Marjan Island resort, could strengthen the emirate’s growth prospects over the next two to three years, S&P Global Ratings said on Monday.

S&P now rates RAK’s long-term outlook as “positive”, upgrading it from “stable”.

The ratings agency is also forecasting that RAK’s fiscal surpluses will support a government net asset position of around 13 percent of GDP by 2026.

“The positive outlook reflects our view that RAK’s economy could grow beyond our current expectations,” S&P said.

This is “on the back of planned construction projects in the emirate and the spillover effects on RAK’s mining sector from investment spending in the UAE, the rest of the GCC and the Indian subcontinent.”

Real GDP growth in RAK, the fourth largest emirate in the UAE with a population of nearly 350,000 people, is likely to average close to 4 percent over the next four years, compared to 2.6 percent in 2012-2021.

Although the hospitality sector makes up only 4 percent of GDP, this proportion will likely increase as resorts open, S&P said.

There are plans to open more than 20 hotels in RAK over the next five to six years, increasing its hotel room capacity by 90 percent.

By far the largest is the Wynn resort. It will house the first gaming area in the Gulf region and is expected to open in early 2027.

The 5.6 million sq ft development on Al Marjan Island is estimated to cost the equivalent of about 30 percent of RAK’s GDP, but S&P said it could boost government revenue and have “broad-based secondary effects” for local companies supplying building materials as well as for the real estate sector, ports, airport and economic free zones.

In September the UAE set up a federal gaming regulator and RAK is set to get the Emirates’ first gaming licence for the Wynn resort.

S&P is also forecasting stronger prospects for RAK’s mining sector. The acceleration of construction projects in the UAE, Kuwait, India and Bangladesh is set to drive strong demand for mining products over the medium term.

Stevin Rock, one of the world’s largest limestone quarrying companies and 100 percent owned by the RAK government, is supplying construction projects including artificial islands for Adnoc’s Ghasha gas field, the UAE’s national rail route and property development at Palm Jebel Ali.

The emirate does not produce oil or gas at present, but the early stages of exploration are underway.

“We view RAK’s economy as more diversified than most GCC peers,” said S&P.

“Although oil prices still spur economic cycles through fluctuations in demand from RAK’s oil-dependent trade partners, this is generally less pronounced than for sovereigns that depend directly on oil.”