Dubai’s credit profile has significantly improved due to minimal real estate exposure and lower-than-expected government debt, according to a US bank report.
During the 2008-09 global financial crisis, Dubai’s property market collapsed, leading to debt rescheduling and an economic downturn. The fall of Lehman Brothers triggered a worldwide crisis impacting Dubai, resulting in economic contraction, business shutdowns, and job losses.
Despite these past hurdles, Dubai successfully managed its debt and now boasts remarkable financial successes, including a record Dh302.7 billion budget for 2026-2028 and a 5% operating surplus, highlighting the emirate’s strong financial status.
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“We believe Dubai’s credit profile has significantly strengthened. The main risks were the real estate sector, population growth, and large debts of Dubai Inc. The first two factors have benefited from strong inflows post the Russia-Ukraine conflict and strong reform momentum. Compared to the 2008 downturn, leverage in the real estate sector is lower, and banks have stronger capital positions with enhanced regulatory oversight,” the Bank of America (BofA) stated in its latest regional economic report.
Data from Dubai’s Department of Finance indicates that the emirate’s debt profile shows a solid financial position, featuring a variety of debt instruments. As of September 30, 2025, the total outstanding debt was Dh112.4 billion, a 3.9% decrease from 2024, with a debt-to-GDP ratio of 20.8%.
According to the Central Bank of the UAE, the UAE banking system’s loan portfolio grew by 11.1% year-on-year, driven by positive economic conditions. Banks maintained strong capital reserves, with a capital adequacy ratio of 17.3% in Q2 2025, and improved asset quality, with the net non-performing loan ratio declining to 1.7%.
BofA also highlighted that Dubai’s strong growth, tax reforms, and spending control have restored the fiscal balance to a surplus, showing a substantial improvement in the emirate’s credit outlook.
“We expect the central government’s fiscal balance to reach 4% of GDP in 2025, double the budgeted figure, based on the first half of fiscal results. Dubai has recorded fiscal surpluses since 2021, with the surplus rising from 1.5% of GDP in 2021 to 8.5% in 2024. Dubai’s 2026 budget anticipates a $2.2 billion surplus (1.3% of GDP), which seems conservative,” the bank noted, referencing data from the Department of Finance (DoF) presentation.
In October, Dr. Jihad Azour, director of the Middle East and Central Asia Department at the International Monetary Fund (IMF), predicted that Dubai would achieve a growth rate of 3.4% in 2025.
With non-oil sectors at the forefront, it is projected that tourism, financial services, real estate, trade, hospitality, aviation, and logistics will drive Dubai’s growth.
The UAE Central Bank’s third-quarter report indicated significant improvements in Dubai’s business conditions, with the PMI rising to 53.5 in July from 51.8 in June, fueled by stronger client demand and increased activity in key sectors.
“With Dubai’s implied sovereign rating approaching Abu Dhabi’s level compared to a decade or two ago, we believe the rationale for Dubai to seek a sovereign rating has strengthened,” the Bank of America concluded in its note on emerging economies.
