Dubai’s come back

Although Dubai went through the financial crisis a little later than the remainder of the world, it was hit badly. It came incredibly close to bankruptcy by the end of 2009 and even though they did not experience d default technically, the country was impacted tremendously by the debt restructuring that followed in the following year. For instance many buildings were not completed and plentiful fled Dubai to avoid their debts and the consequence of being bad debtors in the United Arab Emirates (UAE).

Undoubtedly the economy of Dubai suffered from the financial crisis, but the country’s reputation was also tarnished concerning international investors. Today, although the economy is still not where it was in the past, matters are improving steadily. Dubai’s infrastructure stands in a healthy place and is ready for further expansion and improvements. The country’s transit and commute system has progressed greatly, as more lanes have been constructed to tackle with traffic. Also, you do not get the impression or rather sense that the country is struggling or suffocating in the attempt to expand faster than its infrastructure allows it. All seem to improve and progress smoothly and steadily.

Although Dubai is steadily progressing and solving the problems it was forced to face, some of these problems are still evident when taking a look at the Emirates NBD bank NPL ratio which stands at 13.8%. However, this percentage is slowly improving and the coverage ration now stands at over 60%. Capital adequacy and for tier 1 are marked at 19.2% and 15% respectively, which when compared to most western companies, Dubai’s is higher. Additionally, based on the bank’s first quarter, Dubai’s net profits rose by 25% in comparison to the previous year.

There is a certain drive rising from both the consumer, commercial a wealth management.
It is significant to separate Dubai from the rest of the United Arab Emirate countries, especially Abu Dhabi. It is a fact that Abu Dhabi will never experience financial issues as long as there is oil in the ground. In contrast, Dubai needs to create an economy based on other industries such as tourism, finance and real estate, since it does not have access to oil. In fact, if it was not for Abu Dhabi who aided Dubai, the latter’s economy would have plunged to bankruptcy in 2009.

Therefore, when considering the IMF’s 2014 economic forecast which showed that the UAE’s economy grew by 4.5%, it is significant to take into account that the IMF assessed the entire UAE as a whole and not individually. However the IMF did point out Dubai’s outstanding increase in real estate, especially concerning residential property. Nonetheless the IMF also cautioned the possibility for a property bubble there.

The IMF continued by saying that Dubai’s economy would benefit by the various projects it has currently undertaken and also by the fact that the Expo 2120 exhibition will be hosted and held in Dubai, but yet again the IMF warned Dubai concerning their management by saying if these projects were not managed properly they would increase the risk of a real estate bubble.
In brief, the IMF cautioned Dubai not to make the same mistakes which led the nation to a financial crisis. On the bright side, Dubai seems to have learnt from its mistakes since for instance it doubled real estate fees so as to control conjecture and new boundaries were set on mortgages concerning the federal system last year. Nonetheless, there are still hints in the air that not much has changed.

Experienced UAE property consultants revealed that prices of residents rose by 27.7% in the first four months of this year and in some areas prices are set at the same levels before the crisis hit them. On the other hand the UAE’s central bank, which never criticises the UAE’s economy, warned the UAE that low resident prices in Dubai and Abu Dhabi would lead to increasing imbalances within the real estate sector.

Market investors are more concerned about the UAE’s progress and economy than they were in the past, since the UAE is now a member of the MSCI Emerging Markets index. This means that a manifold of investors are exposed and influenced to it and far more index-linked funds must have more exposure to it.

Dubai must keep in mind its $50 billion debt, which must be repaid either by the government or state-related companies by the end of 2016. Surely the debt can be repaid without any problems provided that Dubai’s investors continue to invest and have faith in the UAE’s economic recovery. On the other hand, Dubai needs to be aware of the fact that confidence is build over a long period, and that it must manage the country properly and steadily as not to lose its investors.