“Given the structural challenges faced by the economy, including the correction in the property sector and the high level of leverage of both corporates (in Dubai) and individuals, we forecast that the UAE’s recovery will be weaker” than in other Gulf countries, Monica Malik, Dubai-based economist at EFG-Hermes, said in the e-mailed report.
She forecast growth of 2.5% this year in the seven-member UAE.
Dubai World, one of Dubai’s three main state-owned business groups, said on November 25 that it would seek to delay repaying debt for at least six months, roiling markets in the Middle East and around the world.
Real estate prices plummeted in Dubai, the UAE’s second largest emirate, as investors pulled out because of the global financial crisis.
The government may have to rely more on local banks for funding, limiting their ability to lend to businesses and consumers, while credit rating downgrades will make it harder for companies to roll over debt, EFG Hermes said.