Dubai recovery: Dubai was emblematic of the excesses of the boom. Yet at a time when people in the West are talking about the “green shoots” of recovery, the once-glossy playground of the United Arab Emirates remains barren of clear turnaround signs.
Humbled Dubai is still resolving its gargantuan debt issues. The resource-scarce emirate only publicly began to confront its financial problems last November, when it revealed that its sovereign debt and that of government affiliated companies amounted to $80bn – of which roughly $19bn requires refinancing by 2010, according to various rating agencies.
Significant progress has been made. In February, Dubai launched a $20bn bond programme, half of which was fully subscribed to by the UAE central bank. The move was effectively a partial bail-out by the UAE’s federal government, based in neighbouring resource-rich emirate Abu Dhabi. The central bank also agreed to underwrite the remaining $10bn.
Fears over the refinancing of Dubai’s most prestigious entities, such as Borse Dubai and island developer Nakheel, have eased. But Nakheel, which has a $3.5bn Islamic bond maturing in December, may still need more money. There are rumours that Dubai World, Nakheel’s parent, might inject the cash generated from the sale of part of ports operator DP World into the developer.
Dubai's key real estate market shows no signs of recovery. If anything, the property slump is getting worse. Office rents fell 18% in the first quarter of 2009, according to CB Richard Ellis. Residential housing prices are roughly 25% down from their peak – but could fall as much as 70%, according to UBS.
It’s hard to evaluate what’s actually happening on the ground, particularly in a place renowned for opacity. Authorities claim Dubai’s economy grew "at around 1-2%" during the first quarter, but the Dubai stock-market barely moved during the same period. There are few statistical or anecdotal stories suggesting anything like a turn.
