Dubai moves into the slow lane
Are the wheels coming off Dubai? Momentum in the spendthrift emirate certainly looks to be grinding to a halt. Last week, Dubai received a $15bn (£8.5bn) bailout from Abu Dhabi, its cash-rich big sister. At least that’s how the lending facility set up by the UAE central bank is being privately interpreted. It’s just one of a number of warning signs.
By Una Galani, breakingviews.com
Last Updated: 3:48PM BST 03 Oct 2008
A year ago, Dubai was running at full-speed. Everything was going up, fast – cranes, new buildings, property prices. Such was the froth, bankers in London were using their bonuses to speculate on Dubai’s luxury water front condos, buying one week and selling the next. But now that’s an unprofitable game.
Dubai has caught the credit cold. In just three months, the spread on Dubai’s credit default swaps have doubled to 300 basis points – almost three times that of Abu Dhabi.
It’s no secret Dubai is resource poor, with just 6pc of its GDP coming from oil and gas. Yet while none of the UAE states have official credit-ratings, global banks have until now freely granted credit to Dubai as if it had the same black-gold backstop as Abu Dhabi.
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