Dubai’s debt burdens are getting worse amid the coronavirus shock

Dubai’s debt burdens are getting worse amid the coronavirus shock
Dubai’s debt burdens are getting worse amid the coronavirus shock

The credit ratings agency Standard & Poor’s said that the high debt burdens in the emirate of will worsen amid a macroeconomic shock related to the Corona epidemic.

In a report, today, Saturday, the agency maintained its previous expectations that Dubai’s economy would contract sharply by about 11% in 2020.

The report explained that this is partly due to the emirate’s economic focus on travel and tourism, which are two of the industries most affected by Covid-19.

The tourism sector, which is very important to the emirate, was dealt a major blow due to the tight restrictions taken by Dubai on the entry of foreigners, before it resumed receiving tourists from July 7, amid a weak turnout due to health concerns.

According to the report, the agency expected Dubai’s total public government debt to reach 77% as a percentage of GDP in 2020, equivalent to 290 billion dirhams ($ 79 billion), compared to 61% in 2019.

The report continued: “The increase in the debt burden ratio is partly due to the sharp decline in GDP due to the repercussions of Corona.”

The agency said that the broader public sector assessment, including the debt of government-linked entities, indicated a debt burden closer to 148% of GDP.

She said, “In the event of financial hardship, we expect Dubai to receive more financial support from the emirate of Abu Dhabi … Dubai’s economy will recover to 2019 levels by 2023.”

She pointed out that the great exposure to tourism and aviation puts it in a position more affected by the epidemic, as well as the broad impact of the drop in oil prices on the economies of the Gulf Cooperation Council countries, of which Dubai is one of them.

The Dubai government expects to record a historically large central government deficit of 12 billion dirhams (3.27 billion dollars), or 3.2% of GDP this year, amid a 28% drop in revenues.

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