| Dubai seeks delay in paying creditors |
[Feb. 5th, 2010|05:16 pm] |
"Analysts agree the move was necessary, but warn it could bring further pressure on the government.
Kamel Wazne, economist analyst of American Univ. of Beirut,said, ""I think Dubai needs to finance its deficit through selling bonds and that's actually what it's doing right now. But this in the future might put some burden in the government if it accelerates its debt.""
To compensate for its lack of oil wealth, Dubai relies mostly on trade, finance and tourism. The over-dependence on foreign capital and large-scale projects have curbed its rebound.
Analysts say the government should work out stimulus measures as soon as possible. It also needs to create more trust in its banking system and reduce unemployment.
Kamel Wazne said, ""This will alleviate some of the pressure on the real estate sectors, and some of the ramification of the financial crisis. I think Dubai is heading, by doing that, probably, it would meet its short term obligation.""
Dubai is widely recognized as an ideal location for investment, with its sprawling man-made islands, indoor ski slopes and the world's tallest tower.
However, the global economic downturn has hit its economy hard. The city-state's property prices have slumped by around 50 percent amid the crisis. Project cancellations and delays have also prompted lay-offs.
The announcement from Dubai World has stoked fears of a potential default and an economic contagion through the global financial system, particularly in emerging markets.
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