Dubai's economic recovery hinges on the successful restructuring of the emirate's companies, further financial support from the Federal Government and improvements in transparency, the Institute of International Finance (IIF) said yesterday.
Significant reform in these areas would encourage greater flows of foreign direct investment, helping to boost growth in Dubai's economy this year, it said.
"With accelerated reforms, Dubai will send the right signals to foreign investors," Garbis Iradian, the senior economist for IIF in the Middle East and Africa, said yesterday in Dubai.
"We should know the outcome of the Dubai World restructuring in the next few weeks, which will help determine whether foreigners will invest here."
Six years of strong growth in Dubai's economy came to an abrupt halt last year after the global financial crisis slowed the property market, stalled new projects and dried up the availability of credit.
A proposed restructuring of Dubai World prompted the injection of US$9.5 billion (Dh34.9bn) of cash into the conglomerate, including more than half from the Dubai Financial Support Fund, which was set up with help from the Abu Dhabi Government.
"Dubai World has been a wake-up call for policymakers that going into debt and leverage may not be too wise sometimes," said George Abed, the senior counsellor and director of IIF for the Middle East and Africa.
The IIF has offered alternative forecasts for GDP this year and next. Under the IIF's "baseline scenario", Dubai's economy would contract by 0.5 per cent this year, with Abu Dhabi's economy growing by 4.5 per cent. GDP for the UAE would be 2 per cent this year and 3.1 per cent next year.
The IIF's "reform scenario" offers a more positive forecast, with Dubai's economy returning to growth, albeit only 0.6 per cent, with Abu Dhabi expanding by 4.8 per cent.
The UAE would grow at a higher level of 2.7 per cent this year, with an expansion of 4.3 per cent next year.
The more optimistic forecast would require a significant strengthening of the federation and greater support from Abu Dhabi to resolve Dubai's debt crisis on a market-friendly basis, the IIF said in a report about the GCC's economic prospects.
An operational restructuring of Dubai's state-controlled companies would also have to happen to improve their long-term viability, it said.
Finally, greater clarity would be needed by investors about whether the government in future would be prepared to bail out any troubled companies it owned.
A turning point in the emirate's property market would be another of the main catalysts to the recovery starting in the second half of the year, said the IIF, which is based in Washington DC.
Appropriate measures to support bank lending would prevent a further tightening of credit conditions and support a recovery of demand, it said.
Across the GCC, the IIF said states were returning to solid growth, underpinned by higher oil prices, which it forecast to average $75 a barrel this year. It forecast GDP to expand by 4.4 per cent this year and 4.7 per cent in 2011.
Structural reforms, including the rehabilitation of banks' balance sheets, and the restructuring of the non-banking financial sector including mortgage and property finance companies, would enhance the growth prospects of the region over the medium term, it said.
tarnold@thenational.ae
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The Facility’s Versatility
Between the start of the 2020 IPL on September 20, and the end of the Pakistan Super League this coming Thursday, the Zayed Cricket Stadium has had an unprecedented amount of traffic.
Never before has a ground in this country – or perhaps anywhere in the world – had such a volume of major-match cricket.
And yet scoring has remained high, and Abu Dhabi has seen some classic encounters in every format of the game.
October 18, IPL, Kolkata Knight Riders tied with Sunrisers Hyderabad
The two playoff-chasing sides put on 163 apiece, before Kolkata went on to win the Super Over
January 8, ODI, UAE beat Ireland by six wickets
A century by CP Rizwan underpinned one of UAE’s greatest ever wins, as they chased 270 to win with an over to spare
February 6, T10, Northern Warriors beat Delhi Bulls by eight wickets
The final of the T10 was chiefly memorable for a ferocious over of fast bowling from Fidel Edwards to Nicholas Pooran
March 14, Test, Afghanistan beat Zimbabwe by six wickets
Eleven wickets for Rashid Khan, 1,305 runs scored in five days, and a last session finish
June 17, PSL, Islamabad United beat Peshawar Zalmi by 15 runs
Usman Khawaja scored a hundred as Islamabad posted the highest score ever by a Pakistan team in T20 cricket
RESULTS
2pm: Maiden Dh 60,000 (Dirt) 1,400m. Winner: Masaali, Pat Dobbs (jockey), Doug Watson (trainer).
2.30pm: Handicap Dh 76,000 (D) 1,400m. Winner: Almoreb, Dane O’Neill, Ali Rashid Al Raihe.
3pm: Handicap Dh 64,000 (D) 1,200m. Winner: Imprison, Fabrice Veron, Rashed Bouresly.
3.30pm: Shadwell Farm Conditions Dh 100,000 (D) 1,000m. Winner: Raahy, Adrie de Vries, Jaber Ramadhan.
4pm: Maiden Dh 60,000 (D) 1,000m. Winner: Cross The Ocean, Richard Mullen, Satish Seemar.
4.30pm: Handicap 64,000 (D) 1,950m. Winner: Sa’Ada, Fernando Jara, Ahmad bin Harmash.
Results
2.30pm: Dubai Creek Tower – Handicap (PA) Dh40,000 (Dirt) 1,200m; Winner: Marmara Xm, Gary Sanchez (jockey), Abdelkhir Adam (trainer)
3pm: Al Yasmeen – Maiden (PA) Dh40,000 (D) 1,700m; Winner: AS Hajez, Jesus Rosales, Khalifa Al Neyadi
3.30pm: Al Ferdous – Maiden (PA) Dh40,000 (D) 1,700m; Winner: Soukainah, Sebastien Martino, Jean-Claude Pecout
4pm: The Crown Prince Of Sharjah – Prestige (PA) Dh200,000 (D) 1,200m; Winner: AF Thayer, Ray Dawson, Ernst Oertel
4.30pm: Sheikh Ahmed bin Rashid Al Maktoum Cup – Handicap (TB) Dh200,000 (D) 2,000m; Winner: George Villiers, Antonio Fresu, Bhupat Seemar
5pm: Palma Spring – Handicap (PA) Dh40,000 (D) 2,000m; Winner: Es Abu Mousa, Antonio Fresu, Abubakar Daud
RESULTS
5pm: Sheikh Mansour bin Zayed Al Nahyan Racing Festival Purebred Arabian Cup Conditions (PA) Dh 200,000 (Turf) 1,600m
Winner: Hameem, Adrie de Vries (jockey), Abdallah Al Hammadi (trainer)
5.30pm: Sheikha Fatima bint Mubarak Cup Conditions (PA) Dh 200,000 (T) 1,600m
Winner: Winked, Connor Beasley, Abdallah Al Hammadi
6pm: Sheikh Sultan bin Zayed Al Nahyan National Day Cup Listed (TB) Dh 380,000 (T) 1,600m
Winner: Boerhan, Ryan Curatolo, Nicholas Bachalard
6.30pm: Sheikh Sultan bin Zayed Al Nahyan National Day Group 3 (PA) Dh 500,000 (T) 1,600m
Winner: AF Alwajel, Tadhg O’Shea, Ernst Oertel
7pm: Sheikh Sultan bin Zayed Al Nahyan National Day Jewel Crown Group 1 (PA) Dh 5,000,000 (T) 2,200m
Winner: Messi, Pat Dobbs, Timo Keersmaekers
7.30pm: Sheikh Mansour bin Zayed Al Nahyan Racing Festival Handicap (PA) Dh 150,000 (T) 1,400m
Winner: Harrab, Ryan Curatolo, Jean de Roualle
8pm: Wathba Stallions Cup Handicap (PA) Dh 100,000 (T) 1,400m
Winner: AF Alareeq, Connor Beasley, Ahmed Al Mehairbi