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376 Sustainable Cities and Communities Design Handbook

9
estate sector). For that reason, Dubai may continue to face significant
rollover risks in the short term, which may raise the cost of borrowing.
The Dubai World (DW) debt restructuring was completed (March of
2011dfinal DW agreement to restructure 14.7 billion USD of its debt
with all of its creditors; DW will divide its liabilities in two tranchesd
with 4.4 billion USD to be repaid in 5 years and the remaining 10.3
billion USD in 8 years), but several other troubled GREs are still in the
process of restructuring.
l International sanctions on Iran: Iran is one of UAE’s largest trading
partners, and as a result, sanctions on Iran could weaken the UAE’s
recovery.
l The political unrest in the region poses downside risks to the outlook:It
may result in more difficult market conditions as evidenced by the sharp
drop in equity markets during Q1-2011. On the other hand, there are also
indications that the UAE may benefit from increased tourism and in-
vestments. Moreover, the higher oil prices are also benefiting the UAE as it
exports oil and hydrocarbons. 10
In 2011 the economic recovery continued. Although the construction and
real estate sectors still remained subdued in the aftermath of the crisis, real
gross domestic product (GDP) growth reached an estimated 4.9%, supported
by high oil prices and production in response to disruptions in Libya.
Nonhydrocarbon growth strengthened to around 2.7%, backed by strong
trade and a buoyant sector of tourism. The current account surplus increased
significantly, to around 9% of GDP. Average inflation remained at 0.9%,
largely due to declining rents. The UAE economic recovery was supported
by an expansionary fiscal policy and the nonhydrocarbon primary deficit
rose to nearly 42% of nonhydrocarbon GDP in 2011 (36% in 2010), because
of Abu Dhabi’s increased current and development expenditures and its
support for the weakened real estate sector. Nevertheless, the overall fiscal
balance, backed by high oil prices, improved significantly. The UAE econ-
omy is proving to be extremely resilient in a difficult global economic
climate.

SMALL AND MEDIUM ENTERPRISES AND THE
GOVERNMENT FINANCIAL SUPPORT
Small and medium enterprises are recognized as an engine of economic
growth and a source of sustainable development. Within this sector micro- and

9. A renewed worsening of global financing conditions could make it more difficult to roll over
some of the GREs’ maturing external debt and would raise the overall cost of their borrowing
from international markets.
10. KAM CO Research, United Arab Emirates (UAE), Economic Brief and Outlook 2011, April
2011 pp. 5e6.