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19 March 2024

Dubai World can repay 2015 debt in full: US bank

Nearly 280,000 people to benefit from the clean energy projects. (Ashok Verma)

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By Staff

Dubai World conglomerate is able to repay its upcoming debt for the next year in full, a US bank said in a note today.

“Dubai World can repay its 2015 maturity in full, we think. 2016 looks to be more challenging with approximately $6bn in restructured debt coming due, including at the Dubai Holding level,” said Jean-Michel Saliba, Mena Economist at Bank of America-Merrill Lynch.

“In the near-term, we think Dubai should be able to tackle refinancing challenges, but the possible increase in government external borrowing needs is set to take place against a more challenging backdrop,” Saliba said.

Reuters said earlier this month at the some 70 per cent of creditors to state-owned conglomerate Dubai World have agreed, subject to approval, to the revised terms of the debt restructuring presented at a meeting in London, sources with direct knowledge of the talks said.

Saliba said direct impact of low oil prices will be more muted in UAE than in other GCC countries – thanks to Dubai’s diversified economy.

BofA-ML analyst said the rebound in Dubai’s real GDP growth to a 4.5 per cent pace since the 2008-crisis has been broad-based.

Construction and real estate still account for 21 per cent of real GDP, 10ppt below the 2008 peak, and grew by 3.5 per cent yoy in 2013.

The financial sector represented 11 per cent of GDP in 2013, with a broadly stable share. Regional petrodollar liquidity has increased the share of non-resident deposits in total deposits in the UAE banking sector from 5.3 per cent in Q1 2001 to still just 9.4 per cent in 2Q14.

The strongest contributors, according to Saliba, to growth have been hotels and restaurants, and manufacturing, which grew by 13 per cent and 8.7 per cent, and accounted for 5 per cent and 14 per cent of GDP respectively in 2013. Wholesale and retail trade accounts for 30 per cent of real GDP.

The global backdrop is important for Dubai with exports and re-exports accounting for 83 per cent of Dubai’s GDP at current prices (61 per cent of which go to Asia, 13 per cent to Europe and 16 per cent to Mena), but trade links suggest broad resilience.