Dubai has no intention of restructuring the debt of government entities that falls due next year, though it may seek to refinance part of it, a top government official said.

The global environment has become more challenging and risky, with much hanging on developments in the eurozone. With a recession now on the cards in Europe, global growth will slow to 3.2 percent next year, with the US posting 1.5 percent growth and emerging markets 5.5 percent.Oil markets are likely to weaken, although sustained growth in emerging markets oil demand will provide support. GCC oil production will need to be scaled back to accommodate the return of Libyan oil, and further OPEC coordinated cuts may be needed to keep prices around $100/b.GCC real GDP growth is expected to surge to 7 percent in 2011 on the back of increased oil production and soaring oil revenues which are being spent by governments on boosting salaries and employment as well as supporting development agendas. While sustained fiscal stimulus will continue to bolster non-oil sectors, a weaker global environment and reduced contribution from oil sectors will see growth dip to 3.7 percent in 2012.The benign global inflation environment will help keep GCC rates under control, despite high public spending. The dollar exchange rate peg will be maintained and GCC interest rates will remain low in line with US rates. Domestic credit growth should continue to revive, although growth will likely remain relatively modest. GCC banks generally remain well capitalised and liquid, although country specific constraints are apparent.Although government spending has risen sharply and oil prices are expected to decline, GCC states (except Bahrain) are still projected to run healthy fiscal and current account surpluses in 2012. That said, fiscal positions are now more vulnerable to oil price movements. The average budget break-even price for the GCC as a whole is estimated to have risen to $70/b.

MSCI?s Market Classification Review on 14 December 2011 is unlikely to see the UAE and/or Qatar being reclassified to Emerging Market status, we believe. That said, the more subjective elements of the review (market participant feedback) make a high conviction call on the outcome difficult and make the arguments against an upgrade less clear cut. We expect alimited negative impact from the announcement and remain Overweight on Qatar due to a sound macro backdrop. We expect previous months? net foreign outflows to steadily reverse going forward.

The global environment has become more challenging and risky, with much hanging on developments in the eurozone. With a recession now on the cards in Europe, global growth will slow to 3.2 percent next year, with the US posting 1.5 percent growth and emerging markets 5.5 percent. Oil markets are likely to weaken, although sustained growth in emerging markets oil demand will provide support. GCC oil production will need to be scaled back to accommodate the return of Libyan oil, and further OPEC coordinated cuts may be needed to keep prices around $100/b.GCC real GDP growth is expected to surge to 7 percent in 2011 on the back of increased oil production and soaring oil revenues which are being spent by governments on boosting salaries and employment as well as supporting development agendas. While sustained fiscal stimulus will continue to bolster non-oil sectors, a weaker global environment and reduced contribution from oil sectors will see growth dip to 3.7 percent in 2012.The benign global inflation environment will help keep GCC rates under control, despite high public spending. The dollar exchange rate peg will be maintained and GCC interest rates will remain low in line with US rates. Domestic credit growth should continue to revive, although growth will likely remain relatively modest. GCC banks generally remain well capitalised and liquid, although country specific constraints are apparent.Although government spending has risen sharply and oil prices are expected to decline, GCC states (except Bahrain) are still projected to run healthy fiscal and current account surpluses in 2012. That said, fiscal positions are now more vulnerable to oil price movements. The average budget break-even price for the GCC as a whole is estimated to have risen to $70/b.

BMI is below consensus in our forecast that sees real GDP expanding 3.3% in 2011 and averaging 4.1%through to 2016. Nevertheless, the UAE?s status as a safe haven amid the regional turmoil of the Arabspring is actually benefiting the economy: resultant growth and investment in the domestic banking andtourism sectors as a consequence of Bahraini unrest is of particular note. This is good news for the retailand tourism sub-sectors of the UAE real estate market.However, the commercial market remains plagued by huge amounts of unoccupied property and weakcredit conditions. Even with improving economic prospects and expected increased demand, the immensevolume of oversupply will continue to depress rentals. New supply was certainly limited in H111, butplenty of projects are still under way.Underlying figures from CPI Financial show that the value of cancelled and delayed construction projectsin the UAE rose 13% month-on-month to US$170bn in August 2011. The country accounted for 56% ofthe total cancelled or delayed projects in the Middle East and North Africa during the month. Theseconcerning figures no doubt contributed to Dubai Land Department?s Q311 launch of its Real EstateDevelopment Plan, which is to give a rescue package to 100 projects with financial problems.