Record setback for the non-oil private sector in the UAE

A specialized economic survey showed a record setback for the non-oil private sector in the UAE, in the latest evidence of the gradual collapse facing the country amid severe floundering in the policies of the ruling regime.

The IHS Market PMI index showed that the non-oil private sector in the UAE contracted at a record pace for the second consecutive month in April.

According to the international index, the measures taken to isolate the public to combat the emerging pandemic of the Coronavirus have intensified the pressure on the already slowing economy in the UAE and incurred huge losses.

The index of the manufacturing and services sectors fell to 44.1 points in April, compared to 45.2 points in March. Note that any reading above the 50 level indicates growth, and below that indicates contraction.

The production and new export orders index fell sharply, and the production index fell to 39.9 points last month, compared to 47.2 points in the previous month.

Tourism has declined sharply as countries around the world imposed similar restrictions amid the pandemic.

“The closing of stores and restrictions on travel internally and externally have had tremendous implications for new activities that have come down at an unprecedented pace after a sharp decline during March,” said David Owen, economist at IHS Market.

He added, “Business sentiment recorded its lowest level in almost three years, which reflects the growing uncertainty caused by the COVID-19 crisis. While companies remain broadly optimistic about growth next year, some respondents are skeptical and point out that the risk of an economic downturn is mounting.

The new coronavirus has caused a huge shock to the economic growth in the UAE, which is already suffering from a comprehensive crisis due to the failure of the ruling regime in the country and the failure of its policies.

Moody’s credit rating agency said the impact of the coronavirus outbreak was a major shock to economic growth in the UAE, which is ranked at the level of (Aa2).

Moody’s expected that most countries will experience a sharp contraction in gross domestic product, as a result of a coronavirus outbreak, and the UAE is particularly vulnerable to the economic impacts of containment measures and the wider global economic shock.

The agency said that the negative growth and financial implications will be more severe in Dubai, due to its dependence on the tourism and transportation sectors.

The agency believes that the debts of entities associated with the Dubai government, are still more exposed to total risks due to their holdings in the real estate, transportation and tourism sectors.

In contrast, entities associated with the Abu Dhabi government are mainly focused in the hydrocarbon sectors, which face challenges from low oil prices but have strong financial positions.

The report stated that “the growth of the non-oil economy in the UAE was suffering even before the outbreak of the Coronavirus, due to a combination of periodic and structural factors, which are likely to be exacerbated by the repercussions that accompanied the spread of the virus.”

The pandemic also coincides with a significant drop in oil prices, which will move to the non-oil economy through confidence and foreign investment channels.

The agency pointed to great challenges facing the non-oil sectors, such as tourism, trade and real estate, which collectively represent more than a third of the gross domestic product in the Emirates, and Dubai holds a greater share of it.

Meanwhile, the financial crises hitting the Emirates airline have worsened in recent months, so that the corona virus pandemic will come and increase the losses of the Dubai-based company.

After the company suffered, during the past year, its weakest annual profit in ten years with the erosion of profits due to high oil prices, the rise of the dollar and the intensification of competition, Bloomberg said that Emirates Airlines began using cash reserves to return the money of customers whose flights were canceled due to the Coronavirus pandemic.

Bloomberg indicated that there are about half a million pending orders for clients who want to get their money back.

Emirates Airlines said it seeks to process 150,000 redemptions per month.

The agency notes that Emirates Airlines and some other companies are directing customers to vouchers, which has led to a wave of complaints.

“We immerse ourselves in our cash reserves to process refunds,” said company president Tim Clark.

The US agency notes that the global aviation industry is expected to lose up to $61 billion in the second quarter, according to the International Air Transport Association.

And Emirates Airlines said a few days ago it offers customers two other options: keep the current ticket for up to 24 months, or replace the unused portion of tickets with a travel voucher equivalent to the amount paid in their original reservation.

In a report published on April 6, Bloomberg Agency said that Emirates Airlines is in talks to collect billions of dollars in loans to be added to the rescue plan announced by the Emirate of Dubai, after the Corona virus caused the disruption of air traffic.

The agency quoted informed sources that the airline is communicating with local and international banks about the financing that will be added to government financial aid, the value of which has not been disclosed.