The Standard & Poor's credit rating agency said today, Saturday, that the actual gross domestic product in Abu Dhabi will shrink by 7.5% this year due to the drop in oil prices and the impact caused by the outbreak of the Corona virus, and also expected that the financial deficit in the emirate would rise to about 12%. This year from 0.3% in 2019.
The agency added that the smaller Emirates in the United Arab Emirates are expected to receive "exceptional financial support" from the country with the support of Abu Dhabi in the event of financial hardship.
On a related matter, three informed sources said two weeks ago - according to Reuters - that the governments of Abu Dhabi and Dubai are discussing ways to support Dubai's economy by linking assets in the two emirates.
Abu Dhabi government Mubadala Fund is likely to play a major role in any agreement.
Several economic sectors in Dubai stopped almost completely during the outbreak of the Corona virus, and the emirate is facing the most severe economic decline since a debt crisis in 2009, and it lacks the oil wealth that Abu Dhabi possesses to mitigate the negative repercussions.
Abu Dhabi provided support to Dubai after the 2009 crisis with a $ 10 billion government loan that was later extended, and $ 10 billion in bonds issued by Dubai to the central bank.
One of the sources said that any support from Abu Dhabi that is now agreed upon will be "coordinated through mergers of assets in which Abu Dhabi and Dubai compete directly, or where they have joint ownership."
The source added that "the most likely deal that will take place in the near term is the merger of the local stock markets," adding that it is possible for banks to merge as well.
Capital Economics, headquartered in London, has said in previous statements that Dubai is the largest economy in the Middle East and Africa, at risk of economic harm from measures aimed at curbing the spread of the Corona virus, adding that Dubai's economy may shrink by at least 5 to 6. % This year if these measures continue until summer.
Informed sources have said that Dubai has had discussions in recent weeks with banks on a number of financing options that include loans and private bonds.
Sources said that they are also studying fundraising supported by the road fees revenue.
Dubai's economic growth slowed before the Corona pandemic, and hopes to benefit from hosting the World Expo in October were dashed, as it was postponed to 2021.