Dubai growth spills over to neighbouring Sharjah

Wam

S&P Global Ratings has affirmed ‘BBB-/A-3’ ratings on Sharjah, driven by UAE’s buoyant oil and non-oil activity supporting growth in the emirate.

“We expect Sharjah’s budgetary performance to gradually stabilise over 2023-2026,” the ratings agency said in a report.

The primary fiscal deficit – deficit excluding debt interest payments – is forecast to trend toward balance, in line with the government’s medium-term fiscal outlook.

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Sharjah is one of the seven emirates that make up the UAE, with a population of 1.8 million. Ninety percent of residents are expatriate workers, many of whom take advantage of the lower rental rates in Sharjah and commute to work in neighbouring Dubai.

The emirate’s GDP per capita is estimated to strengthen slightly to $21,500 in 2023 from $20,700 in 2022.

Since the emirate doesn’t have a large hydrocarbon sector, its economy is more diversified than most peers in the region, with a significant contribution from the cement, glass, petrochemicals, and household goods sectors, among other manufacturing industries.

S&P expects the emirate’s average economic growth of nearly two percent over 2023-2026.

“Strong economic activity in the larger emirates of Dubai and Abu Dhabi, teamed with that across the wider GCC region and supported by favourable oil prices, should uphold Sharjah’s growth prospects.”

The emirate’s largest economic sectors will expand in 2023, with construction contributing 13 percent of nominal GDP, followed by wholesale and retail trade (12 percent), real estate activities (10 percent), manufacturing (six percent), and financial services (five percent).

Capital expenditure is expected to remain “relatively high” at about 15 percent of the government spending in 2023, despite falling 40 percent from 2022.

S&P also maintained a stable outlook backed by the Sharjah government’s move to introduce sufficient measures to stabilise its net general government debt burden as a percentage of GDP over the next two years.