Dubai: Chimera on a spiral towards its death
Dubai is again back in the news but for the wrong reasons. With the ongoing Covid-19 pandemic, Dubai is staring at a recession with experts forecasting Dubai’s economy is going to shrink by 5.5% in 2020. Dubai faces about $10 billion in debt maturities this year with revenues expected to drop in line with the pattern of the 2009 crisis. Bank of America estimates that Dubai’s fiscal deficit could widen to $4.4 billion, or 3.9% of GDP, and could be as high as 5.3% if interest payments on a loan from Emirates NBD, Dubai’s biggest lender, are included.
The pandemic and the associated lockdowns have hit Dubai’s economy which relies majorly on retail sales, travel, tourism and real estate sectors really hard. One survey expected, 70 per cent of Dubai companies to go out of business within six months due to the pandemic. Amid the current uncertainty, businesses in UAE’s seven emirates, as elsewhere across the world, are slashing salaries, putting employees on unpaid leave, and reducing staffing levels and Dubai is no exception.
The state-owned airline, Emirates recently fired 600 pilots including a few Indians with what is being seen as one of the largest layoffs in the aviation industry. The airline has also announced 50 per cent salary cuts for employees in all grades 4 and above until September. Dubai’s property developers are cutting salaries by as much as half as the pandemic hits Dubai’s property developers and mall owners. Joyalukkas, is closing its “weak performing” outlets, while Malabar Gold & Diamonds, with more than 100 outlets in the GCC states, has decided to delay opening all its stores until there is clarity on rent reductions from its landlords. Similarly, it’s likely more retail stores will face closure leading to job losses.