UAE’s economy deteriorating and expectations of a record deflation
Indicators are mounting on the UAE economy to experience an unprecedented deterioration with expectations of a record contraction against the backdrop of several crises hitting the country, notably the low oil prices and the emerging coronavirus crisis.
The International Standard Chartered agency said that it is expected that the UAE’s GDP will shrink by 4.5% in 2020, as a result of the reduction in oil production in a significant decline compared to previous expectations of growth of 1.4%.
This comes as falling oil revenues and a lack of liquidity forced the UAE to borrow from abroad and issue $7 billion in sovereign bonds.
The Department of Finance in Abu Dhabi said in a statement that the sovereign bonds were divided into three segments, which are “a chip with a value of $2 billion for five years, a chip with a value of $2 billion for ten years, and a slide with a value of $3 billion for thirty years.”
The UAE is going to borrow again, in an effort to get rid of low oil prices, the repercussions of facing the coronavirus pandemic and filling the persistent budget deficit, even though it spends billions of dollars in its foreign wars.
Global debt investors may be wary of any new bonds, given the heavy debt burden of Dubai, which is estimated at $135 billion, or 125% of GDP, and nearly half of it is due before the end of 2024.
In late September, the Emirate of Abu Dhabi announced the launch of multi-tiered sovereign bonds with a total value of $10 billion in different rates of return, and the Department of Finance in the emirate considered that this measure “reflects the strength of the credit record” for Abu Dhabi, without providing any excuses that justify taking These root borrowing measures.
At that time, oil prices had not tumbled at unprecedented rates for 18 years, as a result of the war to dump the markets in which Saudi Arabia was involved, and the coronavirus pandemic had not intervened to disrupt the world’s economies in such a violent way.
