Dubai could make a “modest payment” towards its $20bn Abu Dhabi-related debt in 2014, according to Bank of America Merrill Lynch (BofA).

“The UAE recovery is well entrenched and supportive global liquidity conditions are allowing Dubai to look past near-term maturities. The wave of maturing restructured debt from 2015 onward is the key challenge, but there is little visibility and enough time for now,” said London-based economist Jean-Michel Saliba in a report, following a series of meetings with UAE policymakers.

BofA estimates Dubai’s economy will grow at a 4 per cent pace, a trend that will ease deleveraging. The bank expects Investment Corporation of Dubai and Borse Dubai to meet their significant debt maturing in 2013 and noted that the Dubai Group restructuring is on track.

However, “‘little filtrated from Dubai World’s meeting with lenders or its progress on asset sales to meet its $4.4bn March 2015 loan, while questions remain about the likelihood, structure or necessity of repeat bailouts by Nakheel”, said BofA.

It added that Dubai’s Department of Finance views the 2013 fiscal deficit target of AED1.5bn – about 0.5 per cent of GDP – to be within reach, moderately narrowing from 2012 levels and aiming for balance over the next two years.