70% of Dubai Businesses Expected to Go Under in Next 6 Months
The economic fallout from the coronavirus has the Dubai Chamber of Commerce expecting 70 percent of businesses to go under, according to CNBC.
The agency surveyed 1,228 Chief Executives across different economic sectors between April 16 and 22. Almost 75 percent of those surveyed were overseeing operations at small businesses with less than 20 employees.
66 percent of respondents believe there was a moderate-to-high risk of going under in the next 6 months. 27 percent expect to go out of business in the next month. 43 percent expect to go under in the next 6 months.
Dubai relies on the tourism, entertainment, logistics, property and retail sectors. 74 percent of travel and tourism companies expect to go out of business in the near future
“Full and partial city-lockdown measures are bringing demand in key markets to a standstill ... The double-shock impact is pushing economic activity down to levels not seen even during the financial crisis,” the Dubai Chamber wrote in its report on Thursday.
The agency continued saying the “Dubai Chamber surveyed 1228 out of 245,000 companies in Dubai in April when the lockdown measures were in the most strict phase ... their sentiments were based on the expectation that the strictest lockdown phase would be prolonged.”
However, the economy is expected to bounce back. “We anticipate that business confidence will improve significantly in the coming weeks and months as businesses return to more normal operation.”
However, a swift recovery is needed due to the 80 percent expatriate population. If jobs don’t return soon, most workers will have to return to their home countries, which would ultimately lead to a slow economic recovery. “I so far think we’re looking at a minimum population contraction of 10% for the year,” said Nasser al-Shaikh earlier this month. He is the former director general of Dubai’s department of finance .
To mitigate the economic fallout, the Dubai government passed a $408 million stimulus package to increase liquidity. The central bank also injected $70 billion into the economy to help commercial banks provide debt relief.
In March, the Dubai Chamber of Commerce reported that “banks seem to have increased lending to SMEs which saw a 5.3% y-o-y growth, to reach a value of AED 93.4 billion ... This improvement was mainly due to the government stimulus package announced in March.”
Furthermore, the pandemic only added to the issues in the region. Revenues had been declining for some time. Residential property prices have been declining for some time and have fallen 30 percent from their 2014 highs.
The coronavirus crisis follows a number of years of declining revenues for some of the emirate’s most important sectors, primarily real estate and hospitality. Residential property prices had already fallen 30% from their 2014 peak amid oversupply and weakening demand, and revenue per available hotel room was down more than 25% since 2015.
Last year Dubai’s economy grew 1.94 percent, the slowest rate since the Great Recession.
The pandemic only added to the stress with the Chamber of Commerce stating, “The impact of COVID-19 crisis on the world economy during 2020 is projected to be greater than the 2008-09 financial crisis.”