Bank of America said in a research note that Dubai may witness a recession of about 5.5% in 2020, as it faces debt maturities of about ten billion dollars this year, while revenues are expected to decline in the style of the 2009 crisis.
This comes as the Emirates Airlines group announced that it has decided to end the services of a number of its employees due to the difficulties caused by the Corona virus crisis.
The measures taken to curb the spread of the Corona virus deal a blow to the economy of Dubai, and led to the almost complete cessation of vital sectors such as tourism and aviation.
Bank of America estimates that Dubai's fiscal deficit may widen to $ 4.4 billion, equivalent to 3.9% of GDP, and may rise to 5.3% with interest payments on a loan from Emirates NBD, Dubai’s largest bank in the emirate.
Bank of America said financing the fiscal deficit or injecting liquidity into semi-government entities would likely be through loans from Emirates NBD, Dubai branch in the first place. Dubai may also use $ 1.4 billion in deposits with the bank or issue bonds through a private placement.
The International Monetary Fund data estimated the debts of the Dubai government and related entities at about 110% of GDP, unchanged in terms of nominal value since the global financial crisis in 2009, but Bank of America said that more companies ’faltering will be possible if it continues. Economic recession.
Bank of America added, "Continuous revenue losses may raise concerns about corporate solvency if the recovery is weak."
Noting the IMF data, the bank said that Dubai and the semi-government entities are facing debt repayments of about ten billion dollars this year.
He said he expects the government and banks to get support from the oil-rich Emirate of Abu Dhabi and the Emirates Central Bank if necessary, but debt recovery from companies affiliated with the Dubai government in the coming years is at greater risk.
Sources told Reuters this month that the governments of Abu Dhabi and Dubai were looking at ways to support Dubai's economy by linking assets in the two emirates. Dubai denied the content of the report.
Layoffs
Meanwhile, the Emirates Group announced today that it has decided to end the services of a group of its employees due to the difficulties caused by the emerging crisis of the Corona virus, but without specifying their number.
"Despite the gradual return to operationalization of our flights in these difficult times, and within a framework of strict adherence to preventive measures, the fact remains that the global pandemic of Covid-19 has had profound negative impacts on many economic sectors around the world," the group said in a statement.
"After reviewing all possible scenarios to maintain the level of our operations, it was imperative that we made a very difficult decision to end the services of a group of our team members," the statement added.
The Emirati group employs about 100,000 people. And announced last March to reduce basic salaries temporarily by rates ranging between 25% and 50% for the majority of workers.
On May 10, the group had expected that at least 18 months would pass before the travel demand returned to normal.
The International Air Transport Association forecast last month that the revenue of airlines in the region would be $ 24.5 billion lower than 2019.
The organization emphasized that the stopping of air traffic threatens 1.2 million jobs in the sector and related sectors in the Middle East and North Africa, that is, half of the jobs in the field of aviation.