Friday, October 31, 2008

Dubai debt roundup

1. The National
The Government’s aim was for the sector to account for a quarter of gross domestic product by 2010.

Achieving that, however, depends on a continuing inflow of people to occupy the properties being built. So far, immigration has delivered. The UAE’s population has been growing about six per cent a year, and is on track to rise from 4.5 million last year to more than five million by the end of next year, according to the Ministry of Economy.

This summer, the ratings agency Fitch warned that the economy was vulnerable to any decline in immigration, a concern echoed by its peers. “Domestic demand for property is insufficient,” said Farouk Soussa, director of sovereign ratings at Standard & Poor’s in London. Without demand from abroad, he said, “we would see a strong ­correction in housing prices”.

The trouble is that construction to accommodate this influx has been financed by borrowed money. Lots of it. Dubai’s debts now exceed the size of its economy, according to Moody’s Investors Service. “Lots of Dubai’s construction boom was financed with borrowed money,” said Brad Setser, an economist at the Council on Foreign Relations in New York. “I suspect credit growth will be more constrained, which may cause a host of knock-on problems.”

The International Monetary Fund says Dubai is in no danger, but concerns among investors have sent the cost of insuring the debt of Dubai-backed companies up four-fold since May.
2. Gulf Daily News
Standard & Poor's Ratings Services has revised its outlooks on six banks in the Gulf to stable from positive.

At the same time, it affirmed its long- and short-term counterparty credit ratings and various debt ratings on these banks.

"The banks we took the rating actions on are Emirates Bank International, National Bank of Dubai, Kuwait Finance House, Burgan Bank, Bank Muscat and BMI Bank," the agency said.

"The outlook revisions mainly reflect the less supportive environment in which these banks operate," said Standard Poor's credit analyst Emmanuel Volland.
3. Gulf News
Dubai World chairman Sultan Ahmad Bin Sulayem said the group has not cancelled any project because of the current market troubles.

"We as a company have not cancelled any project," Bin Sulayem said at a bankers' lunch organised by Emirates NBD bank. About the local property sector, he does not see a general fall in prices and expects demand for real estate to continue outstripping supply.


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