Government measures taken so far to support Dubai through a sharp economic downturn should be sufficient to stabilise its economy for at least nine months, the United Arab Emirates' economy minister said on Monday. Sultan al-Mansouri also said he expected the UAE, world's fifth-largest oil exporter, would escape recession this year even as it faces a real estate downturn and a slump in oil prices.
The Dubai government last week launched a $20 billion dollar bond programme and sold the first $10 billion tranche to the UAE central bank, a move that calmed worries the former Gulf boom town could default on some $15-20 billion in debts due for refinancing this year. "We are evaluating the situation on a case-by-case basis. At present, we see stability for at least nine months," Mansouri told Reuters when asked what further moves the government would take to stabilise Dubai's economy.
"As we go on, we are not isolated from the world. We will address the situation at the federal and local levels and take appropriate measures," he said. Dubai's finance department said last week the emirate would not need to sell the second $10 billion of bonds for now as the first tranche would likely be sufficient to help state-linked firms settle debts and meet other commitments.
The UAE is a federation of seven emirates including Dubai, which threw itself into the global spotlight during an oil-fuelled economic boom by building islands in the shape of palm fronds and the world's tallest tower. The regional boom came to an end late last year as oil prices collapsed by $100 a barrel from a July peak, credit markets froze, stock markets tumbled and Dubai property prices slumped off peak 2008 levels.
Analysts have said they expect Dubai could require further liquidity to support its firms, which have been laying off thousands of employees to cut costs. "That the government would do better to utilise the full $20 billion of the bond programme," EFG-Hermes investment bank said in a note on March 1. "This is partially due to a lack of general disclosure which we believe warrants a less than optimistic stance."
Mansouri said he was "comfortable" about the situation of the UAE economy. Since the global financial crisis deepened in September, the UAE central bank and finance ministry have launched 120 billion UAE dirhams ($32.67 billion) of funding facilities for banks in order to unlock credit markets. Dubai developers, meanwhile, have access to up to $2.2 billion from escrow accounts to cover construction commitments, the emirate's property regulator said last week.