How will the Dubai crisis affect UAE growth?

Will UAE growth diminish?

While other emirates, such as Abu Dhabi and Qatar, are saying the Dubai debt crisis will not affect them, the International Monetary Fund (IMF) has said otherwise, and has predicted regional growth to fall in 2010 due to 'fallout' from the Dubai situation.

Speaking to reporters, Masood Ahmed, director of the IMF's Middle East and Central Asia Department, said that the organisation was looking to down-size their initial forecast for UAE's 'non-oil gross domestic product' to "significantly lower" than the 3 percent in had previously projected in October.

Ahmed said that the Dubai property-based economy had dented confidence in the Gulf Arab business hub and would, as a result, lead to higher credit borrowing costs and even impact neighbouring countries.

"Our anticipation is that there will be a significant reduction in that growth rate, down from 3 percent, probably somewhere between 1 percent and 3 percent," said Ahmed.

The Dubai debt crisis

Dubai World's announcement at the weekend that it couldn't pay $26 billion in debts, sent shock-waves through the world's economic centres and IMF believe that as a result, the company has helped to "helped to put boundaries around the amount and the scope of the debt restructuring."

Ahmed added that the IMF had been encouraged by Dubai World's announcement that it would strive for "equitable treatment of creditors in the debt talks", but emphasized more was needed.

"We do believe that continuous engagement and communication with creditors and investors will be critical to ensure an orderly and timely solution," he added.

It is believed that the Dubai debt crisis will not cause a 'second recession' and that any impact on international banks who had loaned money to Dubai world would be 'contained and manageable'.

Relevant articles:

"Big goals will remain (Dubai's) objectives" | Is Abu Dhabi going to help Dubai? | The Dubai debt crisis

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