Dubai is facing the risk of a debt crisis reminiscent of the 2009 crash that wiped out thousands of jobs and nearly half the value of the emirate’s stock market, economists are warning.
only this time, declining business growth over recent years is being compounded by the double whammy of crushed oil prices and global lockdowns brought on by the coronavirus pandemic, cases of which have surpassed 8,200 in the United Arab Emirates.
The glittering commercial hub of the Gulf is the most vulnerable of the economies in the Middle East and North Africa to the economic damage from such (lockdown) measures according to U.K.-based consultancy firm Capital Economics report.
Dubai’s economy could contract by at least 5-6% this year if these measures last into the summer.
Dubai’s GREs, one of which — investment company Dubai World — triggered the emirate’s 2009 debt crisis when it couldn’t meet its repayments, have cumulative debts equal to $88.9 billion, or more than 80% of Dubai’s gross domestic product, Capital Economics estimates.
“If debt problems do materialise, Dubai’s government is not in a position to step in given its own large debt burden,” wrote Capital Economics.
Dubai’s sovereign debt — separate from the GRE debt — amounted to 110% of GDP in 2019, according to the IMF, placing it among the highest debt-to-GDP ratios in the world.
