The International Monetary Fund will raise its economic growth forecasts for Dubai and the United Arab Emirates as progress in debt restructuring and government spending boosts the economy, IMF Middle East Director Masood Ahmed said.
Growth in the U.A.E. will be better than the current forecast of 1.3 percent and the 0.4 percent contraction for Dubai this year, Ahmed said in a telephone interview today. He declined to give the new figures, which are due in four weeks time.
Dubai had to seek a $20 billion bailout from Abu Dhabi last year after borrowing $109 billion, according to IMF estimates, to build itself into a tourism and financial center. Dubai World, the state-owned holding company said Sept. 10 it got approval from 99 percent of creditors for its $24.9 billion debt plan. The company in November sent emerging market stocks tumbling after it sought to delay loan payments.
“We see this revision coming about in part because of the removal of uncertainty over the debt issues,” Ahmed said. “Growth of the services sector in Dubai, which mirrors global growth and growth in Asia, and continued spending by the Abu Dhabi government are also factors.”
Last year’s forecast of a 1 percent contraction for the U.A.E. will be increased after more data was released showing a greater contraction, Ahmed said. Dubai’s economy contracted 2.5 percent last year, according to government estimates obtained by Bloomberg News.
Dubai’s efforts to resolve its debt woes are gathering pace after Dubai International Capital LLC, another state-owned holding company, presented plans to sell assets to repay $2.6 billion. The company, part of Dubai Holding LLC that is owned by the emirate’s ruler Sheikh Mohammed Bin Rashid Al Maktoum, has proposed to sell assets over five years and sought a second extension until November on the repayment of a $1.25 billion loan, two people familiar with the plan said Sept. 15.
“The numbers we have seen before were certainly smaller than Dubai World so certainly more manageable,” Ahmed said when asked about Dubai Holding.