Sunday, October 9, 2022

DUBAI's Global Downturn Is Starting !! -- UAE , Dubai 2020 Recession

DUBAI's Global Downturn Is Starting !! -- UAE , Dubai 2020 Recession

DUBAI's Global Downturn Is Starting !! -- UAE , Dubai 2020 Recession Sentiment soured further in the United Arab Emirates as a gauge of business conditions in the second-largest Gulf economy slumped to an eight-year low. In an echo of disputes that have roiled global trade, sales to foreign customers posted a “weaker upturn” and new orders stagnated in the U.A.E. in August, according to IHS Markit. Its Purchasing Managers’ Index dropped to 51.6 from 55.1 in July, declining for a third month and edging close to the threshold of 50 that separates contraction from growth. Fears of a global downturn are deepening as signs of a manufacturing slump have emerged from Europe to Asia. Domestic competitive pressures are compounding the outlook for the U.A.E., a federation of seven emirates that includes oil-rich Abu Dhabi and tourism and trade hub Dubai. Dubai, beautiful, full of potentials and the land of economic advances. Or was it a long time ago. Dubai's economy has been growing so little in the past decade that many believe it can’t be even called growth. Surveys show that the economy has seen a 1.94 percent growth in 2018 which was Dubai’s slowest pace since 2009 when the economy crashed due to a debt crisis. A big part of Dubai’s economy is focused on tourism and international business services. These two sectors have been hurt by a rough patch amid a fall in the real estate market. Experts say a weakening external backdrop, a strong US dollar and the ongoing correction in the property market are headwinds for a number of vital sectors. Property prices in Dubai have fallen by more than a quarter from their peak in 2014. It is expected that the prices fall 5 to 10 percent in the near future as a result of a continued gap between supply and demand. What happened in 2009 that still haunts the sheikdom? Collapsing property prices put Dubai in a debt crisis, so to tackle the situation, Dubai asked a 20 billion dollar bailout from oil-rich Abu Dhabi. After that, Dubai’s GDP grew at 4.8 percent in 2013 before starting to decline and the drop accelerated last year after the property sector slumped and the number of tourists stagnated. The UAE needs to attract 20 million tourists each year to make ends meet. But official figures indicate that in the past two years, the number of tourists stood at just under 16 million and in the first half of 2019, Dubai welcomed 8.3 million visitors. Standard and Poor's say the slowdown that started in 2014 is forecasted to carry on through 2022 due to low oil prices, fallout from the US-China trade war and political turmoil. These days Dubai faces high public debt amounting to around 124 billion dollars or 108 percent of gross domestic product. This debt is divided between the government and state-linked companies. The government has recently announced a series of initiatives to boost growth and S&P says it expects Dubai's economy to pick up to 2.4 percent this year, largely due to the completion of projects related to the international trade exhibition Expo 2020. But at the same time, it says the growth is unlikely to stay high since a trade war between China and the US is killing the economy across the world. Lower regional demand due to the US-imposed sanctions on neighboring Iran is another factor. It will have a negative impact on transit trade which is an important contributor to Dubai's economy. A slowdown in Dubai's economy since 2014 is forecast to carry on through 2022 due to low oil prices, fallout from the US-China trade war and political turmoil, Standard and Poor's said Tuesday. Growth in the Middle East's most diversified economy has also been impacted by a deterioration in the key real estate and tourism sectors, the international ratings agency said in a report. Dubai faces high public debt amounting to around $124 billion, or 108 percent of gross domestic product (GDP), divided between the government and state-linked companies, the report said. The emirate's GDP grew at just 1.94 percent last year, its lowest since 2010 when the city state was still recovering from the impact of the global financial crisis and defaulting on its debt. S&P said it expected Dubai's economy to pick up to 2.4 percent this year, largely due to the completion of projects related to the international trade exhibition Expo 2020 opening in October next year. After the Expo, growth will then moderate to 2 percent through 2022, it said. The trade war between the United States and China, and lower regional demand due to sanctions on neighboring Iran, are likely to slow transit trade, an important contributor to the Dubai economy, S&P said. Dubai's GDP grew at 4.8 percent in 2013 before starting to decline and the drop accelerated last year after the property sector slumped and the number of tourists stagnated. The city-state, one of seven sheikhdoms that make up the UAE, had expected to attract 20 million visitors annually by 2020 when it hosts the 6-month Expo. But in the past 2 years, the number of tourists stood at just under 16 million and in the first half of 2019, Dubai welcomed 8.3 million visitors, according to official figures. The property market, which contributes some seven percent to GDP, has been in a downturn since mid-2014, with sale and rent prices shedding a third of their values. Dubai ruler and UAE Prime Minister Sheikh Mohammed bin Rashed on Monday formed a committee to regulate the oversupplied real estate market. During the past year, the emirate has taken a raft of measures to boost the domestic economy and lure foreign investors by easing residency and business rules, including allowing full ownership of businesses by foreigners outside free trade zones. The emirate draws 70 percent of its revenues from fees on a host of transactions, some 24 percent from taxes and profits of government companies, and just 6 percent from oil.

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“Control oil and you control nations; control food and you control the people.” Henry Kissinger

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