UAE's Abu Dhabi GDP to contract 7.5% in 2020 on oil price crash, virus: S&P Global Ratings

Dubai — Abu Dhabi, the oil-rich emirate in the seven-member UAE federation, is forecast to see its economy contract by 7.5% in 2020 due to the oil price crash and coronavirus outbreak, S&P Global Ratings said.

Abu Dhabi, which pumps most of the UAE's oil, is projected to rebound with economic growth averaging 2.2% between 2021-2023, the agency said Friday.

The emirate is forecast to pump on average of 2.8 million b/d in 2020, down from 3.1 million b/d in 2019, S&P Global Ratings said.

The emirate generates about 90% of its income from oil and derives 50% of its GDP from crude, according to S&P Global Ratings.

The UAE, OPEC's third largest oil producer, is trimming an extra 100,000 b/d in June, on top of its OPEC+ commitments, as it joins Saudi Arabia and Kuwait in helping to rebalance the oil market.

OPEC+ is cutting a record 9.7 million b/d in May and June as part of an agreement that will ease curbs through to April 2022.

"Even before the pandemic began, economic growth had been subdued, averaging 1.3% over 2018-2019, largely as a result of oil production cuts under the previous OPEC agreement," S&P Global Ratings said.

The ratings agency said the emirate's financial assets will help it offset the impact of oil price volatility and the pandemic.

"The exceptional strength of the government's net asset position provides a buffer to counteract the effect of oil price swings and COVID-19 on economic growth, government revenue, and the external account, as well as the effect of increasing geopolitical uncertainty in the Gulf region," S&P Global Ratings said.

The agency is also forecasting that Abu Dhabi's fiscal deficit will widen to 12% of GDP in 2020 from 0.3% in 2019 due to the low oil prices.