UAE economic crisis comes with commercial recession

The economic crisis in the UAE continues to worsen amid threats to the state of an unprecedented trade recession as well as to undermine the work of banks.

IHS Market International Research Corporation announced, on Tuesday, that the PMI index in the UAE fell in January, on a monthly basis.

In its monthly report, the corporation said that the UAE PMI decreased from 50.2 points in December to 49.3 points last month, at the lowest level since August 2009. A drop in the index from 50 points means that there is a contraction, in While exceeding this level indicates expansion.

The report pointed out that the conditions of the non-oil producing private sector in the Emirates witnessed a deterioration last month after the volume of new orders decreased, and production was unable to grow for the first time in ten years. The index monitored the decrease in the workforce numbers at one of the strongest recorded rates, while sales prices fell for the sixteenth month in a row.

On the price front, the report stated that Emirati companies continued to reduce their sales prices for the third consecutive month in light of the strong competition, which led to the restriction of profit margins.

The PMI is based on 5 main pillars, which are new orders, inventory and production levels, supplier delivery volume, and the employment and work environment.

Meanwhile, Dubai Islamic Bank is preparing to cut about half of the workforce in one of its linked banks through a layoff plan due to financial pressures.

This will be done by laying off about 500 employees with the recently acquired “Noor Bank” as part of plans to reduce costs in the two banks.

Reuters news agency quoted three sources as saying that layoffs will start after the completion of the meetings between the managers of Dubai Islamic Bank and the employees of Noor Bank.

Dubai Islamic Bank has more than nine thousand employees, while the number of permanent employees in Noor Bank ranges between 1,200 and 1,400 employees.

The specialized reports confirm that the economic crisis in the UAE is exacerbating and escalating on a record basis, warning that it will reach the point of the explosion, and among its evidence is the reduction in the institutions and banks operating in the country.

A unit of the International Standard Chartered Bank had cut more than 100 jobs in the retail activities sector in the UAE last August, at a time when official data show that the banking sector and many activities are exposed to many pressures.

Fitch’s international credit rating agency also confirms that Emirati banks have not fully recovered from the real estate crisis that struck Dubai in 2010, stating that “bank loans in the second and third stage are already high (which have been restructured), with an average of 15-20% of the total Loans are likely to increase.”