Dubai still not out of the woods yet, warns the IMF (BY IFN)

Dubai still not out of the woods yet, warns the IMF

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UAE: Positive growth has been recorded across the main sectors of Dubai’s economy over the last few months, particularly in real estate, banking and tourism. Debt repayments by local banks such as Dubai Islamic Bank’s US$3.75 billion (US$1.03 billion) loan from the UAE Finance Ministry which was paid in full in March, as well as successful restructurings by government-related entities are also considered to be a clear sign of economic recovery in the emirate. Just yesterday, the Morgan Stanley Capital International (MSCI) annual market classification review upgraded the MSCI UAE Index to emerging market status, an initiative which the Dubai Financial Market (DFM) is said to be heavily invested in, according to its managing director, Essa Kazim. “The reignited interest of local and foreign investors towards DFM since the beginning of the year underlines that we have catered to investors’ expectations and displayed the attractiveness of the UAE market to foreign investments,” Essa said. However, the International Monetary Fund (IMF) has suggested that the emirate take more prudent steps this time around as the economy recovers, instead of just riding the wave of a new boom. “A faster pace of consolidation in Dubai would be desirable to address the emirate’s continued debt-related risks,” it said in its latest report on the UAE. The report also described insufficient domestic policy reforms as a risk to the UAE economy, in the event of a new “boom and bust cycle”. Renewed optimism fuelled by rising real estate prices and loose global liquidity conditions could also spur a renewed cycle of imprudent risk-taking and re-leveraging by government-related entities, and possibly affecting banks’ balance sheet in light of their growing association with government-related entities, the IMF warned.