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Mon 11 Feb 2008 05:30 PM

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Experts play down Dubai crash fears

Analysts dismiss concerns that the booming emirate is overheating and due for correction.

Experts looked to calm fears that a possible market crash could stunt Dubai’s impressive growth on Monday, arguing the emirate’s expanding population and sound economic fundamentals would sustain future growth.

Speaking at the Dubai International Financial Exchange (DIFC), a panel of experts argued that the expansion of Dubai’s market, particularly in the real estate sector, was not in imminent danger of “bursting” as it is underpinned by sound economic fundamentals.

“It is easy to come to Dubai and look around at all the cranes and think that it’s all a bubble waiting to burst,” said Farouk Soussa, director for Standard & Poor’s sovereign ratings division. “I would caution against taking the ‘bubble’ approach,” he said.

Soussa said the region’s high population growth, expected to increase at close to 10% over the next decade, ought to sustain high demand for residential property and service the needs of the expanding economy.

“If you take the UAE as a whole, there are few pitfalls from a ratings perspective” Soussa told ArabianBusiness.com after the official discussion.

Speaking specifically about Dubai and the level of debt the emirate has taken on in order to fund its expansion, Soussa said he remained confident the emirate is on sound footing.

“While it [Dubai] does have a greater debt than some of its GCC partners on a gross basis and even on a net basis, it is certainly not disproportionately greater, or not even as great as some of the more highly rated countries in the west,” he said.

Sousa emphasized the emirate's strong growth in real estate as a sound economic fundamental, saying that supply bottlenecks will be serviced by the large amount of new inventory coming on to market in future months.

Adding to Soussa's comments, Jan Willem Plantagie, regional manager for Standard & Poor's in the Middle East, pointed toward the growth opportunities in emerging markets as a key driver in attracting international investment capital.

“Dubai will continue to be a gateway for both global investors seeking to maximize returns in emerging markets and for regional investors looking to grow abroad,” Plantagie said.

The diversification of Dubai's economy and its repositioning as a finance and tourism hub would also add to the underlying strength of the record GDP, currently at around 13% in real terms, he said.

Asked when a possible correction in the regional markets may occur, if at all, Plantagie said any answer would be “pure speculation” adding only that the situation is “being eyed very closely” by investors.

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