According to research by the chamber of Commerce of Dubai, published on Thursday, about 70% of businesses expect that they will close their businesses for the next six months, because the coronavirus pandemic and a global shortage of destroy demand for goods and services.
From 16 to 22 April, a period of the most rigid quarantine, chamber of Commerce of Dubai (The Dubai Chamber of Commerce) conducted a survey of 1 228 CEOs in different sectors. Almost 3/4 of respondents were small businesses, employing less than 20 people. More than 2/3 of the respondents said that in the next six months, the risk of exit from business is moderate or high. About 27% said that they expect losses of your business over the next month, and 43% expect to cease operations within six months.
Dubai, whose economy is one of the most diversified and independent from oil in the Persian Gulf, is more dependent on sectors such as hospitality, tourism, entertainment, logistics, real estate and retail trade. Hotels and restaurants the country has received international recognition, but almost half of the restaurants and hotels interviewed by the organization will go bankrupt in the next month. About 74% of travel companies said they expected the closure at the same time, and 30% of companies in transport, storage and communications expect the same fate.
The representative of the chamber of Commerce of Dubai later on Thursday, said some of the poll results, saying in a statement that “chamber of Commerce of Dubai interviewed 1 228 of 245 000 companies in Dubai in April, when isolation measures were in the most severe phase … their mood was based on the expectation that the most severe phase lock will be extended”.
«We expect that business confidence will improve greatly in the coming weeks and months, when the company will return to normal work”.
But in the current uncertainty, companies in the seven Emirates of the UAE, as elsewhere in the world, cut salaries, laid off employees with unpaid leave and downsize.
In the United Arab Emirates was little more than 26 000 confirmed cases of the coronavirus, at the same time on Thursday killed 233 people. Dubai, the commercial and tourist center of the country, has imposed a strict 24-hour lockdown for approximately three weeks starting from the beginning of April.
While in the Muslim Holy month of Ramadan restrictive measures were relaxed, which allowed shopping centres and some businesses to open with loading up to 30%, the demand is not much increased, and the layoffs in the companies continued. From 24 March there were no incoming passenger flights for citizens of other countries.
For a country that relies on 80% of the foreign population in most of its economic activities, the stakes are even higher: if people can't find work, they are likely to return to their countries, depleting the consumer base required to provide any economic opportunities for recovery. According to diplomatic missions of these countries, more than 150,000 Indian nationals and 40,000 Pakistani citizens have already left or are about to leave the UAE.
“I still believe that we expect a minimum reduction of the population within 10% during the year" — written in the beginning of this month Nasser al-Sheikh (Nasser al-Shaikh), the former Director General of the Department of Finance of the government of Dubai.
At the end of March, the Dubai government announced the stimulus package in the amount of 1.5 billion dirhams ($408 million) aimed at enhancing liquidity and mitigating the insulating process due to the coronavirus, which included a lot of refunds and reductions of charges and reduced utility costs. The UAE capital Abu Dhabi in the same month announced a plan of emergency stimulus by $27 billion to help private business and banks.
The Central Bank of the UAE has also allocated a stimulus package of $70 billion to help commercial banks to provide debt relief. But many companies still need more support or are hesitant to take on new debt, given the precarious prospects of recovery.
In the report of the Dubai chamber notes that in March, “the banks apparently increased lending to SMEs, which grew by 5.3% to 93.4 billion dirhams. This improvement was mainly due to the stimulus package the government announced in March.
“the Government of Dubai continues to monitor the situation and offer support where necessary to help the entire business community of Dubai during this time" — said the representative of the Dubai Chamber a few hours after the publication of the survey.
The crisis in the fashion industry has followed the already existing decline in income over a number of years in some of the most important sectors of the Emirate, primarily in real estate and hotel business. The residential property prices due to the weakening demand fell by 30% compared to their peak of oversupply in 2014, and income per room in hotel room fell by more than 25% in 2015.
In the past year, the Dubai economy grew by only 1.94%, which is the slowest growth rate since 2009. Crisis occurred over a decade ago, was caused by the crisis in real estate that has forced Dubai to apply for financial assistance in the amount of $20 billion to its more affluent and more conservative neighbor — the UAE capital Abu Dhabi.
But the global pandemic is likely to lead to large losses in Dubai than the recession of a decade ago. In the chamber's report warns: “it is Assumed that the negative impact of the crisis COVID-19 on the world economy in 2020 will be stronger than the financial crisis of 2008-2009».
Materials on this topic can also be read:
70% of Dubai companies expect to go out of business within six months due to coronavirus pandemic, survey says (CNBC)
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