The Dubai Government yesterday approved a budget for next year with a fiscal deficit pared down by 41 per cent compared to this year’s plan.
Spending was projected to rise by 11 per cent to Dh37.8 billion next year, according to data the Dubai Media Office released on its Twitter feed.
“The Dubai Government prefers to expand its expenditures to support the economy and contribute to the higher rates of economic growth,” Abdulrahman Al Saleh, the director general of Dubai’s Department of Finance, said via Twitter. Next year’s revenues would reach Dh37bn, up 13 per cent from this year, it said.
The budget deficit would not exceed 0.26 per cent of GDP, it said. Officials had planned to trim this year’s deficit to below 0.5 per cent of GDP.
Dubai has been striving to close the gap between spending and revenue in recent years as it focuses on curbing the profligate spending during the pre-global financial crisis era.
It has been supported by an economy that accelerated by 4.9 per cent in the first half of the year, helped by a pick-up in trade, tourism and a once-sickly property market.
As a result, government finances are gradually improving.
“A more entrenched growth recovery and fiscal consolidation plans are appeasing our previously voiced concerns on debt dynamics at the Dubai central government level,” Bank of America Merrill Lynch analysts wrote in a report released yesterday. They estimated that direct Dubai government debt stood at US$50.5bn, representing 50.5 per cent of the emirate’s GDP.
“In the absence of further government-related entity bailouts, debt dynamics point toward a stabilising and gradually declining path, but sensitivity to the global backdrop is pronounced as growth, interest rate shocks and fiscal deterioration could raise the debt to GDP ratio to 65 per cent by 2021,” the report said.
Dubai is expected to find out tomorrow whether its bid to host the World Expo event in 2020 has been successful. Staging the event is expected to net Dubai a $23bn windfall.
But the cost of hosting the event is also likely to require fresh borrowing, raising debt levels back to 2009 levels, say analysts.