Sharjah’s economy, the third largest in the UAE, is forecast to grow 2.7 per cent this year and 2.9 per cent in 2019 thanks to an uptick in capital expenditure and higher oil prices, according to a Moody’s Investors Service report.
Moody’s, which has given Sharjah an A3 stable rating, said the emirate’s economy is supported by its membership in the UAE, relatively high GDP per capita and low, albeit rising, government debt.
"Gradual institutional improvements and a recovery in the state utility company's financial performance support our current assessment, offsetting the impact of a rising debt burden on the overall credit profile,” said Thaddeus Best, a Moody's Analyst and co-author of the report. "The outlook also reflects our expectation that new government revenue-raising measures will lead to a stabilisation in the debt burden."
Sharjah’s economy is expected to benefit from overall growth in the UAE economy, particularly in neighbouring Dubai, and increased government income from the 5 per cent VAT that was introduced in January this year.
Moody’s is projecting the UAE’s overall gross domestic product will grow 2.2 per cent this year and 2.9 per cent in 2019, up from 0.8 per cent expansion in 2017.
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“Sharjah's moderate economic strength reflects its strong growth dynamics, high GDP per capita and strong competitiveness, balanced against the economy's relatively small nominal size,” the Moody’s report said.
“Despite the absence of formal monetary transfers to the emirates, Sharjah benefits from being a member of the UAE. The Federal government funds some public services for UAE nationals directly from its own budget, including defence and a basic level of education and healthcare; this spending is then supplemented by the government of Sharjah.”
Sharjah’s fiscal deficit, which narrowed to 2.8 per cent of GDP in 2017, will dip further in 2018 thanks to VAT revenue and implementation of other measures.