The Week That Was

Dubai trouble

The announcement by Dubai World (DW) of a de facto default on the eve of the Eid al Adha holidays rocked the global financial community. Having for some time projected an upbeat message of recovery, Dubai was forced to admit that not all was well with the vast array of government-linked corporate entities. The statement would clearly not have materialized in the absence of genuine necessity but revealed frustratingly little about the true extent and nature of the problem. In spite of the setback, it is important not to exaggerate the crisis. At this point, there is little to suggest that its direct impact will extend significantly beyond Dubai. Nor is it likely that the debt restructuring itself will be as disruptive as the initial market shock would suggest. In overall terms, the DW crisis underscores the resilience of the regional economy as much as it highlights the number of risks still present in the system.