S&P downgrades Dubai credit ratings

Financial Times

Standard & Poor’s lowered its ratings on a series of big government-linked companies in Dubai on Tuesday, owing to the emirate’s deteriorating economic outlook.

The credit rating agency also put four Dubai-based banks on review for downgrade, predicting that a contracting economy and wilting property market will weigh on the emirate’s financial institutions.

Dubai’s half-decade of rapid growth and extravagant construction projects has been abruptly reversed by the credit crunch, exposing an $80bn pool of largely short-term debt.
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The rating agency expects Dubai’s economy to contract between 2 per cent and 4 per cent this year.
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The agency said it expected the “interventionist” federal government to shore up systemically important banks and government-linked entities, adding some support to long-term ratings. Dubai has been extended a $10bn lifeline by the federal government.

There have been complaints about excessive negativity. Abdulkhaleq Abdullah in an op-ed in the Gulf News,

The financial crisis is global, so why single out Dubai which is still doing relatively better than other global financial and commercial centres?

The answer to this question was the underlying theme ably addressed by Dr [Christopher] Davidson in his interesting book about this trendsetting city.

Despite the numerous factual and historical errors, the book is a scholarly work and comes across as being generally fair and sympathetic to Dubai.

But Dr Davidson's sudden public change of heart is rather surprising. A presumable lover turning into a sharp critic and orchestrating a character assassination campaign of the former muse in the media raises serious questions about not only motivation and credibility but also consistency and authenticity.

Dr Davidson, with his vast and first-hand knowledge, knows that Dubai is not a real estate bubble and is not going to sink. He is also in a position to refute all the silly headlines about tensions between Dubai and Abu Dhabi, the two pillars of the UAE.

How he opted to reinforce the convoluted image of a furious Abu Dhabi taking over and reining in the maverick Dubai defies reasoning.