May 27 (Bloomberg) -- Dubai, the Gulf emirate restructuring $23.5 billion in debt, could recover “relatively quickly” thanks to rising oil prices and its good infrastructure, said Stephen King, chief economist at HSBC Holdings Plc.
“In the long-term, yes, I don’t think one can write off Dubai because of one particular crisis,” King told reporters in the emirate late yesterday. “Is it the end of the story? No, I don’t think it is.”
Real estate prices in Dubai have collapsed by more than 50 percent from their 2008 peak, according to Deutsche Bank AG estimates. The emirate rattled markets globally last year when it said it would delay payments owed by state-owned Dubai World. The company said on May 20 it had reached an agreement with its main creditors to restructure $23.5 billion of liabilities.
Dubai Holding LLC, a company owned by Dubai ruler Sheikh Mohammed Bin Rashid Al-Maktoum, and its units owe banks $12 billion and have begun talks to roll over some of the loans, a person familiar with the matter said on May 10.
King said the infrastructure funded by the borrowing could also help Dubai recover from recession.
“The buildings aren’t going to be knocked down afterwards, so the market adjusts,” he said. “Maybe some people lose their money but after the adjustment phase comes through you sometimes find that the economy can right itself relatively quickly.”
The performance of neighboring economies could also help the emirate’s recovery, said King. “Dubai has a tremendous advantage from being in this particular part of the world if this part of the world does well from rising oil prices,” he said.
Crude oil rose for a second day in New York as the dollar snapped a three-day rally against the euro, bolstering the investment appeal of commodities. Oil has fallen 18 percent from $87.15 a barrel on May 3 as Europe’s debt crisis raised concerns over growth and the future of the region’s single currency.
“Ultimately it’s the oil price that matters, the big story that I’m talking about is of course a China-led global economy will be more positive for oil prices than the U.S.-led economy,” King said.
To contact the reporter on this story: Camilla Hall in Dubai at firstname.lastname@example.org.
To contact the editor responsible for this story: Peter Hirschberg at email@example.com.