Dubai to hike spending despite predicting budget deficit

The Dubai government in the United Arab Emirates on Wednesday announced its 2017 budget foreseeing a deficit of 2.5 billion dirhams ($681 million, 652 million euros) and 3 percent expenditure increase.

The city state, which has established itself as a regional business centre and tourism destination, is predicting its first deficit after two years of balanced budgets (2015 and 2016) since the financial crisis of 2009.

That year, the emirate rocked world financial centres by calling for a moratorium on the equivalent of 23.7 billion euros in debt of its Dubai World group.

The 2017 budget includes expenditure of 47.3 billion dirhams (12.3 billion euros) and a deficit of 2.5 billion dirhams or "0.6% of the GDP of the emirate", a statement said.

Dubai, one of seven emirates in the UAE federation, has the most diversified economy in the Gulf, and is not dependent on oil revenues.

Salaries will account for 33 percent of expenditure next year, while spending on infrastructure projects is expected to rise by 27 percent compared with 2016 -- 17 percent of the overall budget.

"The deficit resulted from the reclassification of the budget and the 27 percent increase in infrastructure expenditure," Wednesday's official statement said.

The economy of Dubai, where the population of 2.5 million people is comprised mainly of foreigners, is focused on the finance, property, tourism and leisure sectors.

The emirate will also host Expo 2020.