Standard & Poor’s Global (S&P) warned that Dubai’s economy is expected to shrink by 11% this year, as it lowered the credit rating of two of the emirate’s largest real estate companies to a “Junk” position.
S&P said that Dubai, the center of trade and tourism in the Middle East, has been severely affected by measures to contain the coronavirus, and is set to shrink nearly four times as economically as it was during the global financial crisis in 2009.
“We expect Dubai’s real gross domestic product (GDP) to drop by about 11% in 2020, compounding the economic slowdown that started in 2015,” S&P analysts wrote in a note, adding that the financial deficit of the emirate is expected to reach about 4% of GDP this year.
A growth recovery of around 5% is expected next year, but real GDP growth will then slow to 2% until 2023, which would be half of what it had averaged over the past ten years.
Standard & Poor’s downgraded Emaar Properties, the largest real estate company in the United Arab Emirates (UAE) and the builder of the world’s tallest tower, Burj Khalifa, to the BB+ ‘junk’ rating from BBB-.
Dubai’s Emaar earnings to drop 30-40%
Emaar’s earnings in 2020 is expected to drop by 30-40% , and total revenue by 15%-20%, while the expected recovery next year will be only partial.
DIFC Investment, a unit of the company that manages Dubai’s International Financial Center free zone, has also been cut into BB+ from BBB-.
“We expect the Dubai financial budget to deteriorate, which reduces its ability to provide exceptional financial support to related entities,” said S&P analysts.