Dubai's credit profile has strengthened significantly due to low exposure to real estate and lower-than-estimated government debt, a US bank said in a note.

During the 2008-09 global financial crisis, Dubai's property prices crashed. The emirate rescheduled its debt, triggering an economic downturn. Lehman Brothers' collapse sparked a global crisis that affected Dubai and the world, causing economic contraction, business closures, and job losses.

Despite past challenges, Dubai negotiated its debt successfully and now reports historic financial achievements, including a record Dh302.7 billion budget for 2026-2028 and a 5 per cent operating surplus, underscoring the emirate's strengthened finances.

“We estimate Dubai's credit profile to have considerably strengthened. The risk to the credit story had been the real estate sector, population growth and large Dubai Inc. debt. The first two factors are intertwined and benefited from strong inflows following the Russia-Ukraine war and robust reform momentum. Compared to the 2008 bust, leverage is lower in the real estate sector (with low credit growth up until recently), and banks have a stronger capital position with greater regulatory oversight,” the Bank of America (BofA) said in its latest note on the regional economies.

According to information from Dubai's Department of Finance, the emirate's debt profile shows a resilient financial position, encompassing a diverse range of debt instruments. As of September 30, 2025, the total outstanding debt amounts to Dh112.4 billion, marking a 3.9 per cent decrease from the previous year 2024, with a debt-to-GDP ratio of 20.8 per cent.

According to the Central Bank of the UAE, the loan portfolio of the UAE banking system grew by 11.1 per cent year-on-year, driven by favourable economic conditions. Banks maintained sound capital buffers, with a capital adequacy ratio of 17.3 per cent in Q2 2025, and improved asset quality, as the net non-performing loan ratio declined to 1.7 per cent.

BofA also noted that Dubai's robust growth, tax reforms, and spending control have returned the fiscal balance to surplus, demonstrating a decisive improvement in the emirate's credit outlook.

“We expect the central government fiscal balance to stand at 4 per cent of GDP in 2025, twice the level budgeted for, based on the first half of fiscal results. Dubai has recorded fiscal surpluses since 2021, with the surplus strengthening from 1.5 per cent of GDP in 2021 to 8.5 per cent of GDP in 2024. Dubai's 2026 budget pencils in a surplus of $2.2 billion (1.3 per cent of GDP), which appears conservative,” the bank said in the note, quoting some of the data from the presentation of the Department of Finance (DoF).

In October, Dr Jihad Azour, director of the Middle East and Central Asia Department at the International Monetary Fund (IMF), projected that the Emirate of Dubai would record growth of 3.4 per cent in 2025.

Driven by non-oil sectors, it is estimated that tourism, financial services, real estate, trade, hospitality, aviation and logistics will drive the emirate's growth.

According to the Central Bank of the UAE's third-quarter report, business conditions in Dubai improved notably, with the PMI rising to 53.5 in July from 51.8 in June. This pickup was driven by stronger client demand and increased activity in core sectors.

“With the increase in implied sovereign rating now closer to Abu Dhabi's level than a decade or two ago, we think the rationale – though not the need – for Dubai to obtain a sovereign rating has improved,” the Bank of America concluded in the note on the emerging economies.

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