In Dubai’s posh Jumeirah Beach Residence district, luxury apartment rents are down about 15 percent from a year ago – a sign, some fear, that the wealthy emirate’s recipe for economic success is getting stale. According to economists, Dubai’s economy has started to melt like an ice cone in a hot summer day near Jumeirah beach.
HITTING ANOTHER ROUGH PATCH
For over two decades, Dubai prospered as one of the world’s most international cities, attracting people and capital from across the globe. Nine years ago, it needed a $20 billion bailout from oil-rich Abu Dhabi to escape a debt crisis caused by collapsing property prices. Dubai’s economy roared back and has grown by a third since then, buoyed by foreign trade, tourism and its status as the main regional hub for business services. Now, however, Dubai is hitting another rough patch. Residential property prices have dropped by more than 15 percent since late 2014 and are still falling. The stock market is down 13 percent this year, the worst performance in the region.
ABRAAJ CAPITAL BOUNCES CHEQUE
Abraaj Capital had a $48 million dollar cheque bounce recently. From January 2018 to the end of May 2018, 26 billion dirhams worth of cheques have been bounced. 1.2 million cheques in total. Or 39.3% of the total number of cheques issued in 2017 which were to come due in 2018. They came due and they bounced. In the coming months of 2018 till December this can become the trigger for a disaster in the making to be dealt by the authorities with no recourse. But Abraaj Capitals’ collapse is a nail in the financial system coffin of Dubai. The biggest confidence eroding incident ever to have taken place in the history of Dubai’s financial system.
PROPERTY PRICES ARE DOWN
Dubai property that used to be sold at 2300 dirhams per square foot is selling at less than 600 dirhams per square foot. Or in simple words, it’s selling at 25% of its value. Gold Souk has empty stores for the first time in 35 years. You could not find a single empty store to rent or buy earlier. Arabian Center, Sunset Mall and Al Ghurair have stores shutting down every week. Emirates Towers with the most chic restaurants is witnessing a closure upon closure of restaurants. Hotels have cut their average price to 30% of what they used to charge and last month alone 18 hotels shut down including Savoy, Ramada, Richmond, Crest, Jarmond and the list goes on.
NEW BUSINESS LICENSES ARE DOWN
Dubai issued 4,722 new business licenses in the second quarter of 2018, down 26 percent from the same period in 2016, the year when new licenses peaked. The falls may be temporary, the result of an economic slowdown in the Gulf caused by low oil prices. But other figures suggest some of Dubai’s traditional growth engines are losing steam, which could mean a long-term slump.
PASSENGER TRAFFIC IN AIRPORT HAS FALLEN
Growth in passenger traffic through Dubai’s international airport has fallen to near zero this year, after 15 years of strong increases. Increasingly long-range aircraft may loosen Dubai’s dominance as a travel hub connecting Asia and Europe. In fact now there are talks that the loss making Etihad might merge with Emirates Airlines.
WHITE COLLAR JOBS ARE REDUCING BY T HE DAY
Official data shows Dubai’s population continuing to expand, by 3.5 percent to 3.08 million in the first half of 2018. But most growth in recent years has been in lower-paid construction and services jobs, not in higher-paid white-collar posts.
DUBAI 2020 A BUBBLE ALL SET TO BURST?
While Dubai government claims that emirate continues to attract businesses and investors as a competitive hub for sustainable business development, but much of this year’s growth is due to a big rise in state spending as Dubai builds infrastructure to host the Expo 2020 world’s fair; its 2018 budget soared 19.5 percent from 2017 to a record 56.6 billion dirhams ($15.4 billion). The government cannot keep boosting spending at that speed indefinitely.
SOURING RELATIONS WITH NEIGHBORS TAKE A TOLL
In the past, Dubai thrived by keeping cordial relations with every country in the region, accepting trade and investment from all of them. That has become impossible. Last year, the United Arab Emirates, Saudi Arabia and other countries cut diplomatic and transport ties with Qatar, ending Dubai’s role as a base for business with the small but super-rich country. Meanwhile, the United States and Gulf allies, including the UAE, are trying to squeeze Iran’s economy by reducing its financial and trade ties. The effort is more aggressive than Washington’s previous attempt to isolate Iran several years ago, diplomats in the region say. The chief executive of a foreign financial firm in Dubai said the emirate faced unprecedented competition from neighboring countries for capital, as low oil prices forced those countries to develop their own non-oil industries. This includes Saudi Arabia like is opening doors like never before.