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COVID-19 Places the Brakes on Dubai, the “World’s Quickest Metropolis”

Dubai, United Arab Emirates © Rasto SK / Shutterstock

Dubai — memorably known as the world’s quickest metropolis by creator and analyst Jim Krane — was already touring within the gradual lane when COVID-19 arrived. The Gulf city-state is one in all seven that make up the United Arab Emirates. It had survived the crash of 2009 and thrived anew on tourism, transportation, monetary and property markets. Nonetheless, Dubai didn’t have a very good 2019, persevering with a development that had began in 2015 with the start of the decline in oil costs. Reflecting that downward trajectory, GDP progress, which in 2014 stood at 8%, had by 2018 fallen to 2%.

A key financial indicator is the property market. Within the ultimate quarter of final yr, each residential and workplace capital values had weakened by 2.4% for the previous and 1.9% for the latter. The drop mirrored a story that had been creating for a number of years, the results of over-building in each markets. However with the influence of the coronavirus not but being felt, builders had remained optimistic {that a} rebound was simply across the nook. As the top of a number one Dubai property valuation service mentioned on the finish of January: “Lowered borrowing prices, improved product choices and enticing developer fee plans could all now be creating the correct circumstances for improved purchaser confidence in Dubai’s property market.”

Freefall

The optimism was not solely ill-founded, based mostly because it was, partially at the very least, on the increase that Expo 2020, scheduled to run for six months from October, would give to Dubai’s economic system. The exposition, the biggest ever undertaken within the Arab world, had projected a $33-billion windfall. Footfall was anticipated to be 25 million, with 14 million coming from overseas. Nonetheless, organizers, citing the pandemic, introduced on Might Four a postponement till October 2021.

By that time, Dubai’s tourism business was already in full freefall. Resorts and eating places had been shuttered since mid-March, and passenger flights out and in of town suspended. The comparability with 2019 couldn’t be starker: Final yr, the emirate entertained 16 million abroad guests. The tourism sector generated $28 billion making Dubai the world’s third largest metropolis in attracting direct worldwide vacationer spending, in accordance with the World Journey & Tourism Council. All of that has disappeared in a matter of weeks and a temper of deep pessimism has settled over the economic system.

survey launched by the Dubai Chamber of Commerce on Might 19 confirmed that 75% of the companies surveyed anticipated to shut inside the subsequent six months. Practically half of the eating places and resorts surveyed mentioned they may not survive past mid-June. In line with the survey, these hardest hit are small and medium companies. The ballot, performed in all main enterprise sectors between April 16 and April 22, surveyed 1,228 CEOs. Practically 75% of these surveyed had been companies with fewer than 20 staff.

Different sectors of the economic system shared within the gloomy information. The large port operator DP World was downgraded by Moody’s two notches to Baa3, the bottom funding grade. The scores company cited rising debt and the “detrimental interference” between the agency and the federal government as causes for the downgrade. As reported by Reuters, “Dubai is borrowing $9 billion to take full management of the port operator DP World and to refinance the debt of state funding automobile Dubai World, which was on the centre of the emirate’s 2009 debt disaster.” Briefly, the federal government is leveraging DP World’s steadiness sheet to repay Dubai World’s money owed.

Debt Burden

In the meantime, it has rushed in to bail out state-owned Emirates airline with an undisclosed amount of money. In a tweet that underlines the tight hyperlinks between the ruling household and the crown jewel of its enterprise empire, Crown Prince Hamdan bin Mohammed, in asserting the bailout, wrote that “Right this moment, we renew our dedication to assist successful story that began within the mid-1980s to achieve its purpose of sitting on the throne of worldwide aviation.” The airline can also be looking for billions in loans on the worldwide market, it has been reported, to complement the federal government’s fairness injection.

It needs to be famous that Dubai, along with the federal United Arab Emirates authorities, has taken important steps to help each companies and people impacted by the coronavirus. Amongst them are a monetary assist bundle that had, by April 5, reached $70 billion; monetary incentive packages for small and medium enterprises; the easing of visa renewal processes for expat staff; a discount in utility payments; and a suspension of evictions.

Nonetheless, Moody’s famous in assessing the UAE’s means to handle the financial penalties of the pandemic that “the detrimental progress and monetary implications are most acute in Dubai, whereas it faces the better danger of its government-related entities requiring monetary assist on account of the deterioration in financial circumstances.”

With a debt burden now standing at $135 billion, or 125% of GDP, Dubai faces a nervous time whereas questioning how lengthy the influence and the results of the pandemic on the economic system will final. As with the crash of 2009, the emirate has a backstop: its sister metropolis state of Abu Dhabi. However assist will include a value, and the crown prince and de facto ruler of the United Arab Emirates, Abu Dhabi Crown Prince Mohammed bin Zayed, will certainly use any request for monetary assist to additional consolidate his already formidable energy base inside the UAE.

*[This text was initially printed by Arab Digest.]

The views expressed on this article are the creator’s personal and don’t essentially mirror Truthful Observer’s editorial coverage.

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