An abra driver wears protective gloves and a face mask on March 18, 2020 in Dubai, United Arab Emirates. Francois Nel | Getty Images

DUBAI, United Arab Emirates — Dubai, the glittering commercial hub of the Gulf, is facing the risk of a debt crisis reminiscent of the 2009 crash that wiped out thousands of jobs and nearly half the value of the emirate's stock market, economists are warning. Only this time, declining business growth over recent years is being compounded by the double whammy of crushed oil prices and global lockdowns brought on by the coronavirus pandemic, cases of which have surpassed 8,200 in the United Arab Emirates. "Dubai is the most vulnerable of the economies in the Middle East and North Africa to the economic damage from such (lockdown) measures," U.K.-based consultancy firm Capital Economics wrote in a report this week. "We think that Dubai's economy could contract by at least 5-6% this year if these measures last into the summer." Lockdown measures in the emirate, which is home to the world's tallest building and largest mall, have seen all but essential businesses close. This "will cause Dubai's economy to contract sharply, exacerbating overcapacity in key sectors and making it more difficult for the Emirate's government-related entities (GREs) to service their large debts," the firm wrote.

Dubai's GREs, one of which — investment company Dubai World — triggered the emirate's 2009 debt crisis when it couldn't meet its repayments, have cumulative debts equal to $88.9 billion, or more than 80% of Dubai's gross domestic product, Capital Economics estimates. The Dubai government's economy department did not respond to CNBC requests for comment or figures, but official numbers are not readily available. In 2018, the IMF estimated that GRE debt was at $60.3 billion. "This is not the first time markets have fretted about a Dubai default," Charles Robertson, global chief economist at Renaissance Capital, told CNBC. "But this time it's serious, given a health crisis, a transport and tourism crisis, an over-supplied real estate market, and an oil price plunge."

An already sliding market

The coronavirus crisis follows a number of years of declining revenues for some of the emirate's most important sectors, primarily real estate and hospitality. Residential property prices have fallen 30% from their 2014 peak oversupply and weakening demand, and revenue per available hotel room is down more than 25% since 2015. Last year Dubai's economy grew at just 1.94%, its slowest pace since the dark days of its near economic collapse in 2009. The crisis, more than a decade ago, was sparked by a property crunch that forced Dubai to seek a $20 billion dollar bailout from its wealthier and more conservative neighbor, UAE capital Abu Dhabi. Now, the pandemic is likely forcing the emirate to postpone for a year its flagship Dubai World Expo 2020 — an event officials believed would draw permanent economic stimulus and investment. Tourism has also evaporated since international travel halted in late March.

A picture shows the closed compound of the Dubai Mall amid the COVID-19 coronavirus pandemic on March 23, 2020 in the United Arab Emirates Giuseppe CACACE | AFP via Getty Images

"If debt problems do materialise, Dubai's government is not in a position to step in given its own large debt burden," wrote Capital Economics. Dubai's sovereign debt — separate from the GRE debt — amounted to 110% of GDP in 2019, according to the IMF, placing it among the highest debt-to-GDP ratios in the world. Therefore, the consultancy wrote, "a key factor that will determine how fresh debt problems in Dubai play out is the response from neighbouring Abu Dhabi." With the pandemic amplifying the supply-demand imbalance, S&P Global Ratings wrote in a note on Thursday, "We now expect to see international demand for property in UAE to be subdued and the fall in residential prices to be steeper than we had expected, and lingering well into 2021." Pressures on the industry had already raised some worries over ripple effects on the banking sector — last year Dubai lenders extended loans worth $66 billion to Dubai's property sector, according to the UAE Banks Federation. And a Fitch Ratings report last September warned that banks "have not fully recovered" from the 2009 crash and "smaller banks are more vulnerable to deterioration in credit conditions due to thinner capital buffers and lower revenue generation."

Will Abu Dhabi step in?

A big question determining the emirate's financial future is the speed and extent to which Abu Dhabi steps in with support. As an emirate, Abu Dhabi's revenues are also being hit by the crash in oil prices, but one of its top economic officials told CNBC last month that it remains in a strong position financially. "Abu Dhabi has the resources, even at these levels of crude oil prices, to continue with its planned progression" of its capital investments for 2020, Mohammed Ali al-Shorafa, chairman of the Abu Dhabi Department of Economic Development, told CNBC in mid-March.