Dubai World Risks Remain For Five Years

Dubai to experience negative economic growth in 2010 as economist warns of Dubai World debt hitting markets for next five years.

The economic impact of the Dubai World restructuring could linger until 2015, according to the consultancy firm of Nouriel Roubini, the economist dubbed Dr. Doom.

“The risk associated with something like Dubai World may be a problem for the next two to five years”, said Christian Menegatti, head of research at Roubini Global Economics.

Speaking on the sidelines at the International Islamic Finance Forum in Dubai, Menegatti said: “You have to work off the excesses of the past and to do that people need to take a haircut, which means international banks that have lent Dubai money.

“Dubai was driven by huge leverage. The problem remains that there’s a vast amount of non-performing loans from this.”

He added that Dubai would see negative economic growth in 2010 and the Middle East as a whole would experience a 3.1 per cent growth rate, after -3.5 per cent last year.

Menegatti works closely with the academic economist Nouriel Roubini, who became known as one of the few commentators who had predicted the looming financial crisis, something that earned him the nickname Dr. Doom.

In a recent interview, he insisted that Roubini Global Economics should be known for its constructive advice, rather than just for predicting disaster.