The Dubai government is to boost spending on infrastructure and economic services in 2009 by 42 percent to AED 37.7 billion (US$10.3 billion) in a move to stimulate the economy.
The government said total revenues in 2009 were expected to be AED 138 billion, while total consolidated, budgeted spending would be AED 135 billion. After adding investment in infrastructure, the result would give Dubai's first-ever fiscal deficit, of AED 4.2 billion (US$1.14 billion) or 1.3 percent of the estimated gross domestic product of AED 301 billion.
The 2009 budget is based on an oil price of US$45 a barrel.
Announcing a first time budget deficit, Nasser Hassan Al Shaikh, Director General of Dubai Department of Finance said: "The budget for the public and services sector is aimed at conserving the dynamic growth Dubai has witnessed in the past few years."
"Operationally we are at a surplus of AED 3 billion but if you add investment in infrastructure, the deficit is AED 4.2 billion," Al Shaikh said, referring to major projects such as Dubai's metro network and new airport.
"The deficit we have is one of the lowest in the Gulf region. The significantly higher budget expenditure and willingness to go for a deficit budget reflects the government's commitment to keep up its spending on key sectors such as public services and infrastructure, despite the economic slowdown that has impacted all economies around the world," said Al Shaikh.
"As far as I know we have never had a deficit in Dubai before," Al Sheikh added.
Other Gulf governments, including Saudi Arabia and Oman, have announced recently they will run deficits next year instead of cutting spending.
The strategy would provide "an essential economic stimulus that will enable businesses to weather the short-term challenges to performance and capitalize on the opportunities that will open up once the global economic recovery begins," said Sheikh Ahmed bin Saeed Al Maktoum, chairman of the Dubai Supreme Fiscal Committee.