الرئيسية
DUBAI, November 23, 2011 (AFP) - Two years after its debt crisis
rocked global markets, Dubai has emerged as a safe haven in a troubled
region, reaping the benefits of building strong service and tourism
sectors.
But the Gulf emirate, which has so far succeeded in
restructuring its mountain of debt, could face tougher conditions if it
seeks refinancing in a sickly international market, while a global drop
in demand could harm its core sector, analysts say.
Before the
global financial crisis struck in 2008, drying up its main source of
funds, the economy of the desert city of skyscrapers had been growing at
breakneck speed.
The emirate's fortunes took a further blow in
2009 when it warned on November 25 that its largest government-related
entity (GRE) Dubai World needed to freeze repayments on some $26
billions of debt, triggering fears of a sovereign debt default.
Its gross domestic product contracted 2.4 percent that year.
That
statement raised the international focus on weak countries in the bond
market, adding to the spotlights on Greece which was soon to become the
first domino in what is now the eurozone debt crisis.
But in
Dubai the sluggishness in the economy was followed by a recovery in 2010
as Dubai negotiated debt restructuring and began to quarantine problem
assets.
Economic growth stood at a mere 0.5 percent last year,
and is expected to be at least 3.0 percent this year thanks to expanding
transit trade and flourishing tourism, although the property sector
remains subdued after shedding more than half its value.
"Dubai
has planned, and started, to address its debt issues through all
possible channels: restructuring, refinancing, asset selling but also
simply through GDP growth, which improves the debt ratio dynamic," said
Philippe Dauba-Pantanacce, a senior economist at Standard Chartered
Bank.
"Dubai's amount of debt certainly did not vanish but it has
not prevented the core assets of Dubai's growth engine from registering
a healthy acceleration this year," he told AFP.
"All major
sectors of Dubai's traditional assets -- trade, tourism, retail sales,
infrastructure, and transports -- have been strong contributors to the
emirate's growth this year."
Tourist arrivals grew 14 percent in
the first half of 2011, while hotel occupancy rates rose over 80
percent, according to regional investment bank EFG-Hermes.
It
said that high occupancy was evident during the summer as many Gulf
tourists avoided troubled traditional destinations like Egypt and Syria.
Dubai's trading sector has also been growing.
Container
traffic increased by 11 percent in the first half of the year,
according to EFG-Hermes, which said ports could also be benefiting from
diversions due to the regional uncertainties.
"Dubai stands out
in the region as it is benefiting from its safe haven status,
particularly in areas such as tourism, trade, and banking sector deposit
inflows," said the bank.
The financial crisis hit the bustling
city at a time when it was building larger than life projects with a set
of superlative aims, including the world's tallest towers and the
largest man-made islands -- big plans for which it borrowed heavily.
Projects
that were completed or nearly completed by the time the crisis hit
escaped its paralysing effect, but many others -- mostly now deemed
unrealistic -- stayed at the drawing-board stage.
"The mood has
completely changed; the hyped hubris of the past has gone -- people are
much more realistic now," said Simon Williams, chief economist for the
region at HSBC.
He argued that the after effects of the "boom and bust cycle" are still around.
"Real
estate is still weak, access to bank credit is still tough and Dubai's
international reputation has yet to be rehabilitated," he pointed out.
But he highlighted the comparative advantages that put Dubai on the right track to achieve steady growth.
"The
emirate has, by far, the best physical infrastructure, most tolerant
social system in the Gulf, and most entrepreneurial risk taking private
sector," said Williams.
"Its stability during a period of widespread regional unrest has further enhanced its appeal," he told AFP.
It has also become more affordable for companies and investors after years of high inflation.
"Before
the crash, Dubai was tax-free but an expensive place to do business. It
is still tax free, but with real estate down by half and wages flat, it
is much more competitive than it was before and that's key for its long
term prospects," he added.
Fears of narrowing access to
international finance due to worsening global conditions could harm
Dubai which has to refinance its obligations. The emirate's GREs
reportedly have nearly $14 billion of maturing debt next year.
"Dubai
risks remain if there is a marked deterioration in access to foreign
funding for a sustained period, given Dubai’s significant refinancing
obligations," EFG-Hermes said.
But the emirate should not face a
problem meeting its short-term debt servicing obligations, putting them
at $600 million in the fourth quarter of this year, it said, adding as
restructuring continues, difficulties would likely be a result of
"external shocks rather than domestic."
A drop in global trade
due to the escalating eurozone crisis, could also affect Dubai which has
established itself as a transit hub for trade.
"A protraction of
the eurozone turmoils could translate into a further erosion of global
demand -- dampened by market stress and collapsing consumer confidence,"
said Dauba-Pantanacce.
"As the most open non oil economy in the
region, Dubai would suffer from a dramatic fall in global trade as it
did in 2008," he warned.
rocked global markets, Dubai has emerged as a safe haven in a troubled
region, reaping the benefits of building strong service and tourism
sectors.
But the Gulf emirate, which has so far succeeded in
restructuring its mountain of debt, could face tougher conditions if it
seeks refinancing in a sickly international market, while a global drop
in demand could harm its core sector, analysts say.
Before the
global financial crisis struck in 2008, drying up its main source of
funds, the economy of the desert city of skyscrapers had been growing at
breakneck speed.
The emirate's fortunes took a further blow in
2009 when it warned on November 25 that its largest government-related
entity (GRE) Dubai World needed to freeze repayments on some $26
billions of debt, triggering fears of a sovereign debt default.
Its gross domestic product contracted 2.4 percent that year.
That
statement raised the international focus on weak countries in the bond
market, adding to the spotlights on Greece which was soon to become the
first domino in what is now the eurozone debt crisis.
But in
Dubai the sluggishness in the economy was followed by a recovery in 2010
as Dubai negotiated debt restructuring and began to quarantine problem
assets.
Economic growth stood at a mere 0.5 percent last year,
and is expected to be at least 3.0 percent this year thanks to expanding
transit trade and flourishing tourism, although the property sector
remains subdued after shedding more than half its value.
"Dubai
has planned, and started, to address its debt issues through all
possible channels: restructuring, refinancing, asset selling but also
simply through GDP growth, which improves the debt ratio dynamic," said
Philippe Dauba-Pantanacce, a senior economist at Standard Chartered
Bank.
"Dubai's amount of debt certainly did not vanish but it has
not prevented the core assets of Dubai's growth engine from registering
a healthy acceleration this year," he told AFP.
"All major
sectors of Dubai's traditional assets -- trade, tourism, retail sales,
infrastructure, and transports -- have been strong contributors to the
emirate's growth this year."
Tourist arrivals grew 14 percent in
the first half of 2011, while hotel occupancy rates rose over 80
percent, according to regional investment bank EFG-Hermes.
It
said that high occupancy was evident during the summer as many Gulf
tourists avoided troubled traditional destinations like Egypt and Syria.
Dubai's trading sector has also been growing.
Container
traffic increased by 11 percent in the first half of the year,
according to EFG-Hermes, which said ports could also be benefiting from
diversions due to the regional uncertainties.
"Dubai stands out
in the region as it is benefiting from its safe haven status,
particularly in areas such as tourism, trade, and banking sector deposit
inflows," said the bank.
The financial crisis hit the bustling
city at a time when it was building larger than life projects with a set
of superlative aims, including the world's tallest towers and the
largest man-made islands -- big plans for which it borrowed heavily.
Projects
that were completed or nearly completed by the time the crisis hit
escaped its paralysing effect, but many others -- mostly now deemed
unrealistic -- stayed at the drawing-board stage.
"The mood has
completely changed; the hyped hubris of the past has gone -- people are
much more realistic now," said Simon Williams, chief economist for the
region at HSBC.
He argued that the after effects of the "boom and bust cycle" are still around.
"Real
estate is still weak, access to bank credit is still tough and Dubai's
international reputation has yet to be rehabilitated," he pointed out.
But he highlighted the comparative advantages that put Dubai on the right track to achieve steady growth.
"The
emirate has, by far, the best physical infrastructure, most tolerant
social system in the Gulf, and most entrepreneurial risk taking private
sector," said Williams.
"Its stability during a period of widespread regional unrest has further enhanced its appeal," he told AFP.
It has also become more affordable for companies and investors after years of high inflation.
"Before
the crash, Dubai was tax-free but an expensive place to do business. It
is still tax free, but with real estate down by half and wages flat, it
is much more competitive than it was before and that's key for its long
term prospects," he added.
Fears of narrowing access to
international finance due to worsening global conditions could harm
Dubai which has to refinance its obligations. The emirate's GREs
reportedly have nearly $14 billion of maturing debt next year.
"Dubai
risks remain if there is a marked deterioration in access to foreign
funding for a sustained period, given Dubai’s significant refinancing
obligations," EFG-Hermes said.
But the emirate should not face a
problem meeting its short-term debt servicing obligations, putting them
at $600 million in the fourth quarter of this year, it said, adding as
restructuring continues, difficulties would likely be a result of
"external shocks rather than domestic."
A drop in global trade
due to the escalating eurozone crisis, could also affect Dubai which has
established itself as a transit hub for trade.
"A protraction of
the eurozone turmoils could translate into a further erosion of global
demand -- dampened by market stress and collapsing consumer confidence,"
said Dauba-Pantanacce.
"As the most open non oil economy in the
region, Dubai would suffer from a dramatic fall in global trade as it
did in 2008," he warned.