The credit ratings agency Standard & Poor's said that the high debt burdens in the emirate of Dubai will worsen, amid a macroeconomic shock related to the Corona epidemic.
And the agency maintained - in a report broadcast on Saturday and published by Anadolu Agency - its previous forecast that Dubai's economy would contract sharply by 11% in 2020.
This is partly due to the emirate’s economy’s focus on travel and tourism, two of the industries worst hit by COVID-19.
The tourism sector - which is very important for 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 the seventh of last July, amid a weak demand due to health concerns.
According to the report, the agency expects Dubai's total public government debt to reach 77% relative to GDP in 2020, equivalent to 290 billion dirhams ($ 79 billion), compared to 61% in 2019.
Greater debt
The report of the Standard & Poor's Credit Ratings Agency stated that "the reason for the increase in the debt burden ratio is - in part - due to the sharp decline in GDP due to the repercussions of Corona."
The agency said that the broader assessment of the public sector - including the debt of government-linked entities - indicated a debt burden of close to 148% of GDP.
"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 said.
The agency noted that the large 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.
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% decline in revenues.