Citigroup report on Dubai

The National:

The global economic crisis could sharply reduce the massive cash surpluses that GCC countries have produced in recent years and temper plans to diversify economic growth beyond the oil sector, a report released by Citigroup says.

The UAE and especially the emirate of Dubai could be most vulnerable to the downturn, said Mushtaq Khan, a regional economist at Citigroup, although he predicted Dubai would be able to engineer a soft landing for its economy and an orderly restructuring of its finances.

“We see a much-needed correction in the property market and an equally necessary consolidation of Dubai Inc,” he said in the report. “Global conditions are likely to slow Dubai’s economic growth, but not knock it out.”
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Mr Khan said “strategic mergers”, combining heavily indebted firms with better capitalised ones, could be used to reduce debt and generate cash, and the Federal Government – and even Abu Dhabi – could be relied on to provide funds in a pinch.

Citigroup has experience with getting in over your head. Nearly a year ago Abu Dhabi took a sizeable stake in Citigroup which was in a pinch of its own.

Citigroup on Monday announced it would cut it workforce by 52,000. A year ago it employed 375,000 worldwide. By the end of the next quarter it expects to have a workforce of 300,000.