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Regional unrest is appears to be having a positive impact on the Dubai economy. Key financial institutions appear to have left Bahrain and relocated to Dubai. Staff from BNP Paribas, HSBC and Norton Rose have moved most of their staff to Dubai, although on a temporary basis for the time being.

 

In addition, Dubai banks are reporting an influx of capital from other regional states, in light of growing unrest in various Middle Eastern countries.

 

There are no firm figures on the number of relocated personnel or on the size of capital moved.

 

Dubai hotels have also reported higher than average occupancies.

 

The regional unrest has also pushed oil prices up and have consistently averaged above $100 a barrel during the 2011.

 

April 1-15, 2011

 

 

Analysis and Forecast: Decreasing Risk


 

The UAE and the emirate of Dubai in particular are likely to experience a mini-boom as a result of the regional situation. There are two main competing effects on the Dubai economy that:

  1. Regional investors will move capital to more stable parts of the region, with Dubai likely to be the main beneficiary. This will lead to increased deposits in Dubai banks. Coupled with higher oil prices, local banks are expected to be able to substantially increase lending. Although the emirate of Dubai itself does not have substantial oil reserves, higher oil prices will contribute positively to the UAE economy, encouraging federal spending.
  2. The regional unrest will have a negative effect on the Dubai economy as non-regional investors are likely to stay clear of increasing their regional exposure as a whole. Painting the whole region with the same brush will likely have a negative impact, particularly on non-regional investors;

However, both those factors are expected to lead to a net positive effect, positively contributing to the real-estate sector, the back-bone of the last Dubai boom.

 

Dubai still faces the issue of debt-restructuring, however, indications point to the fact that those may be on the way of being resolved. It is too early to assess the effectiveness of the solution to the debt crisis at this stage, however, the combination of factors point to an overall decrease of risk

 

The figure below shows break-even price for oil for the GCC, including the UAE.