Dubai unlikely to repeat 2008 financial crisis, analysts say

Investor concerns about the financial crisis of 2008 repeating itself in Dubai are unlikely to be realized, as the emirate’s economic fundamentals are healthier this time around, according to a new report.

Dubai experienced a 4.1 percent growth in GDP in 2015, unlike during the world financial crisis, when the economy shrank by 4.3 percent, Reidin and Global Capital Partners said in a research note.

While company formations remained stagnant in the Dubai Economic Department (DED) jurisdiction in 2008-09, they grew by 7 percent in 2014-15.

Other indicators such as growing budget spending also indicate a low risk of the crisis repeating itself, the report said.

Dubai has increased its budget spending by 11 percent in 2015, unlike in 2008, where budgetary spending was curtailed by 5 percent. This was possible through the further diversification of the economy into sectors such as tourism, retail, and manufacturing.

Meanwhile, an analysis of the Dubai Financial Market (DFM) reveals that the index fell by 77 percent in the 2008 crash, compared to this time around where the decline was nearly half.

“The lower volatility in the market suggests that investor confidence and future growth remains positive, relative to the outlook in 2008,” the note said.

Similarly, real estate markets have also been relatively more resistant to the exogenous and endogenous factors at play, such as low oil prices and the strong dollar.

During the crash city-wide prices fell by 31 percent in the first 22 months, the report said. However in the current slump, prices have fallen by nearly 13 percent in the same time frame, indicating greater maturity of the market and investor base.