COVID-19: 70% of Dubai Companies Expect To Run Out Of Business
70% of Dubai businesses fear they could go bust in the next six months due to the financial problems brought about by the coronavirus crisis, a study revealed on Thursday.
Disruption in cash-flow and being cut-off from access to customers in the United Arab Emirates remain the biggest concerns for these businesses, based on a survey by Dubai Chamber of Commerce.
Dubai’s Chamber of Commerce carried out a survey of the businesses in the emirate in April to judge the economic impact of lockdowns enacted during the coronavirus crisis and released the bleak predictions for the coming six months on Thursday.
Sheikh Mansour bin Mohammed, chairman of Dubai’s Supreme Committee of Crisis and Disaster Management, said the speed with which the UAE leadership had responded to control the coronavirus outbreak helped contain the spread of the disease.
Dubai, which has one of the most diversified and non-oil dependent economies in the Gulf, relies on sectors like hospitality, tourism, entertainment, logistics, property and retail. Nearly half the restaurants and hotels surveyed by the organization expected to go out of business in the next month alone.
Around 1,228 CEOs from Dubai businesses took part in the survey, conducted between 16 and 22 April.
Tram and ferry services have also been restarted. However mosques, cinemas, public beaches and nightclubs remain shuttered.
Fellow emirates have also been easing their restrictions, including the capital Abu Dhabi, where some shopping centers have reopened for business, while in Sharjah, both malls and restaurants have reopened.
The UAE has so far registered 19,661 coronavirus cases with 203 fatalities, the second highest death toll among the six Gulf states.
The UAE, like other Gulf Arab nations, has implemented a rigorous testing programme following an outbreak of the virus among migrant worker communities, most of whom reside in cramped accommodation.
But 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.
Some 74% of travel and tourism companies said they expected to close in that time, and 30% of companies in transport, storage and communications expect the same fate.
“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 released Thursday, entitled “Impact of Covid-19 on Dubai Business Community.”
Dubai Chamber surveyed 1228 out of 245,000 companies in Dubai in April when the lockdown measures were in the most strict phase.
The UAE has just over 26,000 confirmed coronavirus cases, with 233 deaths as of Thursday. Dubai, the country’s commercial and tourism hub, imposed a strict 24-hour lockdown on its population of 3.3 million for about three weeks beginning in early April.
While the lockdown has been loosened through the Muslim holy month of Ramadan allowing malls and some businesses to open at a 30% capacity, demand is slow to return and company layoffs are continuing. Most hotels sit empty and tourism is nonexistent: there have been no inbound passenger flights for non-UAE nationals since March 24.
For a country that relies on an 80% expatriate population for much of its economic activity, the stakes are even higher: if residents can no longer find work, they will likely return to their home countries, depleting the consumer base needed to enable any economic recovery. More than 150,000 Indian nationals and 40,000 Pakistani nationals had already left or registered to leave the UAE by early May, according to those countries’ diplomatic missions.
The Dubai Chamber added in its report: “Though this is a temporary shock for most markets – with recovery to gradually kick in as soon as restrictions are eased – trade with GCC markets is particularly challenging as they suffered double oil price / COVID-19 shocks.”
Dubai announced a $408 million package to boost the economy in March, while Abu Dhabi also unveiled a more substantial $27 billion stimulus plan, despite its own financial woes due to low oil prices.
A $70 billion debt relief plan was also unveiled by the United Arab Emirate central bank, which has seen some lending to businesses.
Dubai Government continues to monitor and offer support where necessary to help all of Dubai’s business community during this time, a Dubai Chamber spokesman said in the hours after the survey’s release.
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.
“The impact of COVID-19 crisis on the world economy during 2020 is projected to be greater than the 2008-09 financial crisis,” it wrote.
The Ministry of Health and Prevention on Friday reported 994 cases of coronavirus in the UAE after conducting more than 50,000 tests.
The total number of cases now stands at 27,892, with 13,798 recoveries and 241 deaths.