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Dubai warns 70 percent of businesses could go under amid Covid-19: Report

Dubai's chamber of commerce says economic activity will fall to levels 'not seen' even during 2008 financial crisis
Man wearing face mask gazes at Dubai skyline from a window on 5 April during city's Covid-19 lockdown (AFP/File photo)

Dubai's chamber of commerce warned that 70 percent of the city's businesses may go under in the next six months because of financial problems brought about by the coronavirus pandemic, CNBC reported.

In a study released on Thursday, the chamber said that lockdowns put in place to curb the spread of Covid-19 "are bringing demand in key markets to a standstill... pushing economic activity down to levels not seen even during the [2008] financial crisis."

The study surveyed more than 1,200 CEOs between 16 and 22 April. More than two-thirds of those interviewed saw a "moderate to high-risk" of their businesses going under in the next six months amid restrictions and lockdowns. 

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While some of those restrictions have been eased, the city has plans to reinstate several more in the coming days to avoid any potential outbreaks as people commemorate Eid, a Muslim holiday marking the end of Ramadan. 

Prior to the crisis, Dubai established itself as the Middle East's tourism, trade and business hub, while Abu Dhabi has maintained its status as the UAE's political and economic capital. Abu Dhabi, unlike Dubai, also has large oil reserves. 

As in most countries, the tourism industry has been hit hardest by the Covid-19 crisis, since lockdowns have resulted in travel and flight bans for Dubai and around the world.  

"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 said in its report.

Abu Dhabi aids crisis 

To combat the economic effects of the crisis, Dubai announced a $408m spending package in March. Meanwhile, Abu Dhabi unveiled a $27bn stimulus plan.

Last week, oil-rich Abu Dhabi said it was prepared to prop up Dubai's economy by merging assets, despite plummeting oil prices.

Still, it is uncertain if the stimulus efforts will be enough to mitigate the chamber's predictions. 

"The impact of the Covid-19 crisis on the world economy during 2020 is projected to be greater than the 2008-09 financial crisis," the chamber wrote in Thursday's report.

During the 2008 financial crisis, Abu Dhabi bailed out Dubai with a $10bn government loan and $10bn in bonds that the latter issued to the central bank.

Last week, the UAE said it was planning to review the structure and size of its government to make it "more agile and flexible".

"We may merge ministries and alter bodies. We will make changes," Sheikh Mohammed bin Rashid al-Maktoum, the ruler of Dubai and vice president of the UAE, said after three days of virtual meetings on the country's post-coronavirus strategy.

London-based Capital Economics has said Dubai is the most vulnerable of the economies in the Middle East and North Africa to the economic damage caused by pandemic-curbing measures. It said Dubai's economy may contract by at least 5-6 percent this year if the measures last into the summer.