S&P warns Dubai economy to shrink 11%

Dubai has been hit hard by covid-19 containment measures and is set for an economic contraction almost four times worse than during the global financial crisis in 2009, S&P analysts wrote in a note dated July 9.

"We now expect Dubai's real GDP will shrink by about 11% in 2020, compounding the economic slowdown that began in 2015 and the emirate's fiscal deficit was expected to balloon to about 4% of GDP this year", they added.

A growth rebound of about 5% is expected next year, but real GDP growth will then slow to 2% through to 2023, which would be half of what it has averaged for the last 10 years.

S&P's analysts said, "We expect Dubai's balance sheet to deteriorate, reducing its ability to provide extraordinary financial support to its related entities".

Emaar Properties, the UAE's largest property firm and the builder of the world's tallest building, Dubai’s Burj Khalifa was downgraded to a BB+ 'junk' rating from an investment grade BBB- score.

It said it expected a 30%-40% slump in Emaar's earnings in 2020, a 15%-20% dive in overall revenues, while the anticipated recovery next year would be only partial.

DIFC Investments, a unit of the company running Dubai’s International Financial Center free zone, was cut to BB+ from BBB- as well.