Dubai: Debt maturities of Dubai in 2012 estimated at $15 billion (Dh55 billion) are manageable for domestic banks, even in the face of a potential global credit crunch triggered by European sovereign debt woes, said Jean-Michel Saliba, an Economist with Bank of America Merrill Lynch.

"Even if credit is to become scarce in the international markets, Dubai's debt maturities next year could be managed through funding from local banks which are adequately capitalised and have healthy loan to deposit ratios," said Saliba.

In recent months the deterioration in the global economies revived concerns about 2010 maturities of Dubai Inc refinancing requirements.

"Our outlook for 2012 redemptions sees some space before the maturities [JAFZA, DIFC] come to bear in H212 and our bank equity research team believes the domestic banking sector could handle 2012 loan refinancing should international banks not participate in the rollover," he said.

The UAE has benefited from high oil prices, higher oil production, and a favourable external environment amid a real estate supply overhang until now.

Dubai's service-based economy has also further benefited from diverted regional capital flows following unrest in Bahrain and increased liquidity in the banking sector though improvements in loans to deposit ratio.

Revised forecast

Amidst the challenging global economic environment BoA Merrill Lynch revised UAE GDP forecast.

"We are now pencilling in growth of 3.9 per cent (up from 2.8 per cent previously) in 2011, but cut growth to 3 per cent from 3.5 per cent previously in 2012 in the UAE," said Saliba.

The International Monetary Fund has projected the UAE's GDP at 3.3 per cent in 2011 and 3.8 per cent in 2012. Dubai's GDP is projected to grow 4 per cent with a potential slowdown next year due to global economic headwinds.

"It is true that a significant headway has been made on debt restructuring and Arab spring has diverted tourists, businesses and financial capital into Dubai. Still, we see scope for the Dubai economy to slow down, debt rollovers to become more challenging, and asset quality to further deteriorate if the European debt crisis evolves into a full-blown financial crisis," BoA Merrill Lynch said in its latest Middle East and North Africa Quarterly.

Merrill Lynch analysts said domestic demand seems to have rebounded, judging by high-frequency counterparty import data and a pick-up in non-food, non-housing CPI inflation. While the loan book of the banking sector grew by 2.5 per cent year to date, credit to the private sector remains weak.

Commenting on the Abu Dhabi based government related entities' debt burden Saliba said these entities too have leverage of close to $120 billion but are not a big concern as they are backed by the Abu Dhabi government through ownership.