Category: Dubai

Among Dubai’s creditors, though, the can-do spirit is wearing a little thin. Last November, Dubai World, one of the largest government-owned conglomerates, announced it would not meet billions of dollars of debt repayment obligations. In response, credit rating agencies such as Moody’s ( MCO – news – people ) and Standard & Poor’s downgraded the debt of several Dubai government-related entities to junk status. “Dubai’s corporate landscape is now effectively a high-yield market,” Moody’s wrote in a December note to clients. In mid-December, Abu Dhabi threw a $10 billion lifeline to Dubai–but the latter is still saddled with debts of nearly $100 billion, which it must face squarely in the coming year.

Dubai’s problems are not the only woes among the economies of the Middle East. Last summer, two vast family-owned conglomerates in Saudi Arabia defaulted on billions of dollars of debt repayments, highlighting lack of transparency and lax lending practices in the region. And in the past year or so, some $500 billion of planned infrastructure projects in the Gulf have been abandoned or temporarily halted as funding has dried up. Meanwhile, the Middle East’s real estate market has slumped–most notably in Dubai, where prices halved in the year following their August 2008 highs.

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Still, indications have begun to appear that the region’s fortunes may pick up in the coming year. Economists note that the Middle East’s regional policymakers acted decisively to shield their financial institutions from the worst of the financial crisis and to ensure that liquidity remained in the banking system. This has meant that the effects of the global economic downturn have been less pronounced in the Middle East than elsewhere, and that the region’s banks are largely in a strong position today. It helps, too, that oil prices have doubled in the past year or so, from lows of $33 a barrel in January 2009.