Is Dubai back? That’s the question economists and government officials ask about once every six months, only to be disappointed. But this time, at least, the stock market seems to be answering a yes.Dubai’s shares have rallied 30 percent so far this year amid a spate of positive corporate earnings, dividend announcements and encouraging economic data.The tiny Gulf emirate is displaying some of the bravado of its pre-crash years in a multi-billion-dollar bid to host the 2020 World Expo. The scale of the bid can be measured by the fact that Universal Expositions can draw up to 70 million visitors during the six months that they are open while Dubai has a population, including expatriates, of just over two million.But “back” is relative. The emirate’s property sector is still in the doldrums as is the banking sector, and a host of bears are lurking outside its borders, ranging from a recession in Europe to nuclear tensions between the West and Iran.“Things are looking a bit happier here in Dubai. People are focusing on tourism, hotel occupancy, trade, logistics, transport and service – all these things are doing quite well,” Liz Martins, Dubai-based economist at HSBC, told The Media Line. “There’s still a lot of slack in consumer spending … still some weakness in real estate and in the banking sector. We see big debt refinancing obligations in 2012. It’s not clear how that is going to pan out.”Dubai has been struggling since it overdosed on credit-financed real estate in 2009. Dubai World, the ports-to-property conglomerate whose decision to freeze debt repayments two years ago shook the foundations of the economy, has since restructured most of its obligations. But the overall debt of government-related entities like Dubai World is believed to be more than $100 billion, with some $15 billion coming due this year alone.Sheikh Ahmed bin Saeed Al-Maktoum, whose large portfolio of titles includes chairman of the Dubai Economic Sector Committee, said three weeks ago that the emirate’s gross domestic product would expand between 4.5% and 5% this year. That pales in comparison to rates of 6.2% in 2007 and 7.4 % in 2008. But, the sheikh’s estimate is at the high end of forecasts. Dubai's Department of Economic Development sees growth of around 4.1% for 2012. Britain’s Standard Chartered Bank’s estimate is considerably lower, at 2.4%. Analysts polled by the Reuters news agency in December forecast the economy for the United Arab Emirates (UAE) would grow 3.1% this year down from an estimated 3.9% in 2011. Dubai accounts for about a third of the UAE’s gross domestic product.Capital Economics, a London-based consultant, doubts it will be able to top 4% anytime in the foreseeable future.“While there are signs of recovery in Dubai, there are also significant downside risks to growth in the next three years or so,” Capital’s Said Hirsh said in a note published on Friday. “We don’t think GDP growth in the emirate will average more than 3-4% a year in the near term.”On the plus side, passenger traffic at Dubai International Airport, the world's fourth busiest, jumped 14% from a year earlier in January to 4.85 million, the largest increase in 14 months. Jumeirah Group, which operates 2,600 hotel rooms across Dubai, including the famous Burj Al Arab, reported that revenue per available room over the Christmas-New Year holiday period was back above the highs reached in 2007.Non-oil foreign trade grew 23% in the first nine months of 2011, compared with the same time the year before.But there are plenty of minuses, too. Although trade figures were up through most of last year, more recent data on global trade is discouraging and cargo traffic at Dubai Airport declined in January. Europe is the second-largest market for UAE non-oil exports, accounting for about a third of the total, and the euro-zone economy contracted by 0.3% in the final three months of 2011 while unemployment has reached 10.7%.Dubai, meanwhile, will not be getting the fiscal stimulus of the oil-rich Gulf States. At the same conference that Sheikh Ahmed offered his 4.5% outlook, Mohammad Lahouel, the head of Dubai's Department of Economic Development, said government spending would remain steady or perhaps even contract this year. That led Eva Fernandes, in a commentary for the Kipp Report, to raise a few doubts about the sunny outlook for Dubai.“Less government stimulus coupled with Lahouel’s prediction of sluggish investments—makes Kipp rather confused as to where this jaunty 4.1% growth rate prediction comes from (apart from optimistic thinking),” she wrote. There are no data for Dubai bank credit, but for the United Arab Emirates as a whole lending to builders and consumers declined last year while non-performing loans are rising. Emirates NBD, the Dubai’s largest bank by assets, boosted net profit 6% to 2.48 billion dirhams ($675 million) in 2011, provisions for bad debt jumped more than five-fold in the final quarter from a year earlier to 1.06 billion.The Dubai Financial Market’s DFM index closed on Sunday at 1754.2, its highest since November 2010 while trading volume has ballooned to 700 million dirhams a day from 25 million six weeks ago. But, Martins and other economists say the stock market rally is less connected with Dubai’s changing fortunes than it is with the global price of oil and a worldwide stock market rally.Meanwhile, the downside risks to Dubai and the Gulf are considerable. Tensions between the West and Iran raised the price of petroleum last week to its highest in nearly a year, boosting the economies of Gulf oil-exporters. Dubai gains indirectly as oil money flows in the form of tourism and investment.But the tensions are also having a debilitating effect on Dubai’s economy, which does considerable trade with the Islamic republic through a large community of expatriate Iranians. The UAE Central Bank has instructed lenders to stop offering trade finance facilities to Iranian businesses, but banks are clamping down even more tightly than required, turning away Iranian customers for fear of violating any international sanctions that could invite penalties from the US and Europe, according to Gulf News.