Dubai's dire financial forecasts fail to materialise The emirate was bailed out with $10bn by its oil-rich neighbour, Abu Dhabi, and still had to reschedule its debts with the banks. Flaws in its state-led development model were exposed: the biggest debtor was Dubai World, a state company, along with its Nakheel property subsidiary, the builder of "castles in the sand" such as the celebrated Palm Islands. But something odd happened. Disaster never struck. Although the cranes fell silent over miles of property developments, headline projects continued to open: a new Metro system, in September 2009; Burj Khalifa, the world's tallest building, the following January; this month, perhaps of greater importance than either, a new $3bn terminal at Dubai airport, built to handle A380 superjumbos. Emirates Airlines has bought 90, and is already operating 31. To say that the new terminal is a sign that "Dubai is back" is not really right - airport passenger numbers kept growing throughout the slump. But it is a good marker of confidence that the worst of Dubai's troubles are behind it. "We got comfy with Dubai about a year ago," said Simon Williams, chief economist for HSBC Middle East. We felt that the cycle had turned again. It had worked through enough of its problems. Mr Williams was always a Dubai optimist, even at its nadir, but even some bears are being persuaded. Saud Masud, a former analyst with UBS in Dubai, used to fear it would become locked in a deflationary spiral of falling population - 90pc is expatriate - and falling GDP as the bubble reversed. He still sees major problems in the property sector, but says refinancing the debt is no longer a concern. "They are going to grow GDP at low single digit rates, but that's twice the global average," he said. That's down from the heady years of the mid-noughties, but as Mr Masud said: "It had better continue growing at that rate. If it were growing at 8pc there would be red flags everywhere. What has recovered is "Mark One" Dubai, Dubai before the Palms. That means Dubai as a transport hub: 50pc of Dubai Ports trade is destined for the rest of the Gulf, the Middle East, or increasingly Africa; Dubai as a regional base for western companies, whose employees prefer the lifestyle to the alcohol-free strictures of Riyadh; and Dubai as a popular tourism destination not just for bling-loving Britons but the even more bling-loving Russians and Chinese too. Tim Clark, president of Emirates Airlines, Dubai's most recognisable business, says the economy had in parts diverted from its original business model. But, he adds, so did three quarters of the world, and in hindsight, Dubai's hangover, so devastating at the time, was dwarfed by what happened elsewhere. Dubai was also helped by the Arab Spring, which sent businessmen scurrying away from other "frontier markets." "We had a big influx, and some of that remains here, putting children into the schools, and that has revitalised the service side of the economy," Mr Clark said. Even before this month's 2012 figures, Dubai's port was pretty much full: Jebel Ali is extending its second terminal this year, and opening a new one in 2014, bringing it from 14 to 19 million TEU capacity, in the standard measuring unit. In 2011, it handled 13 million; before the crash, 11.8 million. That fell by six per cent in 2009, but more than rebounded the following year. Critics, of whom there are many, point out that none of this makes Dubai a nicer place than when many visitors found it hard to know whether to be appalled more by its excess or its autocracy. In some ways things are worse -the UAE's hereditary rulers have detained scores of political activists, afraid of Arab Spring spillover. Even bling is not quite dead. In the last few weeks, some developers have brushed off old, eye-catching plans - replicas of the Taj Majal, new canal-side villa properties (first - build the canal). On closer inspection, few details are revealed, particularly of financing. That seems crazy, with much property still empty from last time round. But with GDP rising and hotels full, the burned speculators of last time round seem a far-off worry. It is hard on those who were fleeced before - but there are advantages as well as disadvantages in relying on a fickle expatriates: they tend to go home when the going gets tough, rather than stage protests. And those who stay - well, they just carry on lunching