Dubai's economy could contract sharply by around 11 percent in 2020 due to restrictions on travel and tourism during the ongoing coronavirus pandemic, S&P Global Ratings said in a research note on Saturday.

While it does not rate Dubai, the rating agency said based on publicly available information, Dubai's gross general government debt will reach about 77 percent of GDP this year (AED290 billion) compared to 61 percent in 2019.

It added that although Dubai's economy is more diversified than that of most its regional peers, it may take until 2023 for it to recover to 2019 levels due to the impact of the global Covid-19 crisis which forced the postponement of Expo Dubai 2020 to next year.

"Dubai's large exposures to tourism and aviation place it in a relatively more vulnerable position to the effects of Covid-19... The indirect effect of weaker demand from Dubai's neighbours will dampen Dubai's trade, tourism, and real estate markets," the rating agency said.

STR Global, a data intelligence and benchmarking firm, reported Dubai's hotel occupancy rate at 26 percent in June as inbound tourism sharply declined following global lockdowns and much-reduced air travel designed to curb the spread of coronavirus.

However, the fact that fewer residents left Dubai during the hot summer months and instead spent more domestically to some extent has supported the economy.

S&P added: "Local support for the economy cannot, however, offset the almost complete shutdown of inbound international tourism for most of 2020, and the likely slow recovery of the long-haul aviation that Dubai specialises in."

The rating agency said the Dubai government now expects to post a deficit of AED12 billion (3.2 percent of GDP) this year, largely owing to the reduction in economic activity and the consequent expected 28 percent decline in revenue.

Its research note added that new government bond issuance and loans will total around 7 percent of GDP in 2020. The government has issued AED8.4 billion of public debt so far in 2020, marking the biggest year for Dubai's debt issuance since 2009.

A prospectus that accompanied Dubai’s planned offering of bonds and Islamic securities last month offered a glimpse into how government finances adjusted to the disruptions caused by the coronavirus.

The government revised this year’s budget revenue to AED44.2bn ($12bn), according to the prospectus, down more than 30 percent from what it originally envisaged. It also decreased its projected expenditure to AED56.2bn ($15.3bn) for 2020, leaving a deficit of AED11.9bn ($3.2bn).

The Dubai government’s debt also includes a AED7.3bn ($2bn) injection into Dubai’s flagship airline, Emirates.

"We expect fiscal deficits to moderate over the next few years, as pandemic effects subside. However, the government's debt-to-GDP ratio is likely to remain elevated at about the current levels," it said.