Dubai economy faces tough 2010 - report

Dubai's economy will remain stuck "in the doldrums" in 2010 following the Dubai World debt announcement made late last year, a new report by Business Monitor International has predicted.

The global research company said that while it expected the UAE to return to growth this year following an estimated 2.7 percent contraction in 2009, it said Dubai's share of the economy "will shrink".

In its new UAE Business Forecast for the first quarter of 2010, BMI added that it saw investment in Dubai "at a virtual standstill" and credit markets "still largely frozen".

The report said: "Dubai's debt problems will continue to dominate the economic agenda throughout 2010... Abu Dhabi's economy clearly looks in better shape than Dubai's."

Dubai World shocked global markets on November 25 last year when it announced plans to request a delay on repaying $26 billion in debt linked to its main property units Nakheel and Limitless World.

BMI's Q1 report added: "Dubai's economy will remain in the doldrums, with investment at a virtual standstill and credit markets still largely frozen, while Abu Dhabi expands, thanks in large part to a buoyant international oil market.

"As a result, Dubai share of the UAE economy will shrink, reversing the trend witnessed throughout most of the past decade."

On Monday, the central bank of the UAE forecast the country's growth to be low in 2010 but better than the previous year.

Governor Sultan Nasser al Suweidi said the central bank expected the growth rate in 2009 to be "slim", while the 2010 rate would be "low" but better than in 2009.

Last month, Shuaa Capital’s UAE Vision 2010 report said the Dubai economy would contract by 0.4 percent year-on-year this year, following on from a five percent contraction last year.

This was mainly due to declines in residential sale prices and the emirate’s population, which have fallen by around 60 percent and nine percent respectively, it said.

Analysts polled by Reuters in January predicted UAE growth would be 2.5 percent this year - the slowest pace in the Gulf.

The International Monetary Fund (IMF) also forecast last month that the UAE economy would grow zero to 1 percent in 2010 as the impact of Dubai's debt restructuring continues to be a drag on its performance.

The UAE central bank and Abu Dhabi lent an overall $20 billion to Dubai last year to help its neighbour restructure debts.

BMI's customers and clients span more than 140 countries worldwide, including more than 400 of the Global Fortune 500 companies.