1. Borrowing foreign debts on a large scale. In order to support the above-mentioned large-scale construction projects, the Dubai government borrowed a lot of foreign debts. With the spread of the global financial crisis and the tightening of the global credit market, a large number of investors withdrew from Dubai. However, Dubai's currency dirham and the US dollar have a fixed exchange rate system, and the expected depreciation of the US dollar has aggravated Dubai's capital flight. In addition, the capital inflow has been greatly reduced, and there is a large deficit in the capital account. Therefore, the government has to borrow new debts to repay old debts to make up for the fiscal deficit and lack of liquidity. Due to excessive borrowing, the Dubai government had to postpone the repayment of sovereign debt.
2. The economy is not supported by real industries. Dubai is not rich in oil reserves, so the government vigorously develops financial industry, real estate industry, tourism industry and logistics industry to promote economic development. In 2006, Dubai's oil production accounted for about 6% of GDP, real estate accounted for nearly 20%, and tourism accounted for 10%. Although Dubai's development model, which relies heavily on foreign investment and real estate, is well combined with its national conditions, it is also reasonable and has indeed promoted rapid economic growth. However, the economic structure that lacks the support of the real industry and the financing mode that relies too much on external funds lack stability and sustainability, especially under the impact of the global financial crisis, it is easy to break out the debt crisis.
3. The global financial crisis caused the real estate bubble to burst. The Dubai government has invested heavily in real estate, and Dubai has indeed achieved rapid expansion. However, these large-scale investment projects are generally difficult to achieve profitability in the short term, but they have to face great risks if they want to make profits in the long run. With the outbreak of the global financial crisis, the capital chain of Dubai's real estate market has broken, and many projects under construction have to stop working because of lack of financial support.
4. The financial market is excessively open. Dubai wants to develop into a financial center, but the financial market is underdeveloped. In order to attract foreign investment, the Dubai government has created a highly free investment environment, allowing foreign investors to repatriate all their investment profits. Before the outbreak of the financial crisis, a large number of profit-seeking and highly liquid capital flooded into Dubai, which triggered high inflation and a large amount of funds went in and out, which was not conducive to the stability of the financial market.