Significance: The debt and real estate crisis in Dubai has spooked international investors and put a question mark over Gulf financial and property markets. However, actual contagion from Dubai within the region has generally been limited, with Abu Dhabi the major exception. Credit markets and business growth remain under a pall, but mostly due to other, local or international, factors. In several other Gulf states, large private businesses have created their own, less publicised crises.

Analysis: The international economic crisis and the Dubai debt crisis have affected Gulf Cooperation Council (GCC) economies to quite different degrees. While the price of credit default swaps — insurance against sovereign default — temporarily shot up in all six, it did so more markedly in Dubai and Bahrain. The impact on Abu Dhabi was less than in these two economies, but it was still higher than in Saudi Arabia and Qatar.

Differential impact. Different degrees of international trust in the GCC economies have much to do with the fiscal cushions different governments control.[Read More]