Record decline in foreign investment in Dubai

Foreign direct investment in Dubai declined 74 percent in the first half of the year compared to the same period in 2019, as the Coronavirus pandemic damaged parts of the global economy.

According to a statement issued by the Dubai government, the emirate attracted around 12 billion dirhams ($3.3 billion) in the first six months of the year. The statement did not provide comparative figures, but last year the government announced foreign direct investment in the first half of 46.6 billion dirhams.

Sami Al Qazmi, head the Department of Economic Development of Dubai, said the pandemic presented a challenge. However, the stimulus packages had prompted “positive developments” in the investment environment.

Dubai has witnessed general isolation measures for several weeks as part of government efforts to curb the Coronavirus outbreak, which caused many companies to be closed temporarily.

The successive losses hit investors in the real estate sector in the emirate of Dubai, UAE, amid expectations from international agencies for the worse, in light of the unprecedented economic crisis for the emirate.

Moody’s, credit rating agency, expects that the real estate sector in Dubai will further weaken, in light of the exacerbation of the supply glut due to the Coronavirus.

Moody’s stated in a report that the pandemic will lead to further slowdown in home sales and decline in rental prices, in a market that is still suffering from major imbalances.

Dubai has suffered from a slowdown in the real estate market for most of the last ten years. Moody’s said that the slowing sector was further affected by a construction wave ahead of the World Expo 2020, which was postponed for a year until October of next year.

The agency added that real estate developers in Dubai “face more weakness in the market, as job losses and salary cuts affect local buyers’ demand for new properties, while travel restrictions limit international demand.”

While the Coronavirus crisis has caused an almost complete halt to vital sectors in Dubai, the Dubai government media office said, on June 30, that the emirate’s economy shrank 3.5% year-on-year in the first quarter of the year.

This month, Standard & Poor’s downgraded Emaar Properties, the largest real estate company in the UAE that built the Burj Khalifa in Dubai, the world’s tallest building, to a high-risk rating of BB + from a BBB- score.

However, Moody’s added that real estate companies in the UAE capital, Abu Dhabi, “where the imbalance of supply and demand for homes is less,” will face less severe decline due to the Coronavirus.

This comes as the net profit of Emirates NBD Bank, the largest Dubai bank by assets, decreased in the second quarter of 2020, by 57.7% year on year, due to the financial allocations it directed to deal with the repercussions of the spread of the Coronavirus.

The bank announced in a statement that the net profit for the second quarter of the year was two billion dirhams ($545 million), compared to 4.73 billion dirhams ($1.3 billion) in the second quarter of 2019.

The bank said that the first half of 2020 showed a 45.3% decline in profits on an annual basis to 4.1 billion dirhams ($1.1 billion), compared to 7.48 billion dirhams ($2.03 billion) in the same period in 2019.

The bank stated that it had allocated about $1.14 billion to confront the repercussions of the Coronavirus, noting that total assets rose 29% on an annual basis last June, to 694.3 billion dirhams ($189 billion), from 537.8 billion dirhams ($146.4 billion) in the same period of the last year.

Customer loans recorded a growth of 1% at the end of the first half, compared to the end of 2019, which is of 443 billion dirhams ($120.6 billion), while customer deposits decreased 2% during the same period to 461 billion dirhams ($125.5 billion) amid the repercussions of the pandemic.

According to the data, fee income decreased by 14% on the back of declining business activities and exemption from paying fees, as the bank granted customers an exemption from paying fees during the precautionary closure period due to the Coronavirus pandemic.

Emirates NBD Bank is one of the largest banks in the Middle East and North Africa region in terms of size of assets, and works to provide banking services in the UAE, Egypt, Saudi Arabia, Singapore and the United Kingdom, and has representative offices in India, China and Indonesia.