Bad News for Dubai’s Economy

Dubai, 10th June: The expatriates living in Dubai are leaving the state, which is bad news for the economy of the country.

According to a report by Baaghi TV, many ex-pats are reported to leave the United Arab Emirates after the fallout from the pandemic and a plunge in energy prices. The population could shrink by 10%, hitting the Gulf’s business and shopping capital.

Wealthy Gulf Arabs have, for decades, depended on foreign workers to transform their deserts into cosmopolitan cities. Many grew up or raised families here, but with no formal route to citizenship or permanent residency and no benefits to bridge the hard times, it’s a precarious existence.

Dubai’s economic model is built on the presence of foreign residents who comprise about 90% of the population.

Pandemic and job cuts in Gulf

Oxford Economics estimates the United Arab Emirates, of which Dubai is a part, could lose 900,000 jobs, eye-watering for a country of 9.6 million, and see 10% of its residents uproot.

Newspapers are filled with reports of Indian, Pakistani, and Afghan blue-collar workers leaving on repatriation flights, but it’s the loss of higher earners that will have painful knock-on effects on an emirate geared toward continuous growth.

With the global economy in turmoil, the decision to leave isn’t straightforward. Dubai residents who can scrape by will likely stay rather than compete with the newly unemployed back home. The International Labor Organization says more than 1 billion workers globally are at high risk of pay cuts or job losses because of the coronavirus.

UAE is granting automatic extensions to people with expiring residence permits and has suspended work-permit fees and some fines. It’s encouraging local recruitment from the pool of recently unemployed and has pushed banks to provide interest-free loans and repayment breaks to struggling families and businesses.

Emirates slashes more workforce in second wave of job cuts

Dubai’s main challenge is affordability. The city that built its reputation as a free-wheeling tax haven has become an increasingly costly base for businesses and residents. In 2013, Dubai ranked as the 90th most expensive place for expatriates, according to New York-based consultant Mercer. It’s now 23rd, making it the priciest city in the Middle East, though it slipped from 21st place in 2019 as rents declined due to oversupply.

UAE isn’t seeing a resurgence in COVID-19 infections as it reopens, but its reliance on international flows of people and goods means it’s vulnerable to global disruptions.

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