UAE economy collapsing… record losses for largest construction companies

Indicators are escalating the gradual collapse of the UAE economy in light of record losses for its public companies, including the largest construction companies in the country.

Arabtec Holding Company, listed on the Dubai Financial Market, said its accumulated losses amounted to 671.3 million dirhams (about 183 million dollars), and constituted 44.7% of its capital of 1.5 billion dirhams.

Experts believe that this percentage, which is close to 50%, requires Arabtec to search for financial options to avoid the worst, especially in light of the conditions of the prolonged “Corona” virus that forced the company to lay off thousands of workers and employees.

Arabtec, the largest contracting company in the UAE and based in Dubai, explained that the main reasons that led to reaching these accumulated losses are limited liquidity in the real estate and construction sector, which led to delays in the collection of financial amounts in many projects.

The company indicated in a statement to the Dubai Stock Exchange, that among the reasons also is the slowdown in the real estate sectors, which led to the limited winning of new projects, in addition to cases of delays in settlements and the recovery of dues and claims, losses as a result of investment in an associate, and an increase in the size of legal disputes.

The company said that it will take a number of measures to address the accumulated losses, by focusing on completing and delivering old projects, winning projects in new sectors, and adopting a selective method in the projects that are bidding on, in addition to reviewing and reducing the workforce, reducing costs and improving productivity.

The company added that in the event of an increased spread of the Coronavirus pandemic and its time range, the continuation of these conditions may lead to multiplying the negative economic effects, which may negatively affect the financial results of the group.

The company announced in February that it had incurred annual losses of 773.8 million dirhams (about 211 million dollars) at the end of 2019, its first annual loss since 2016.

The joint stock companies listed on the Dubai market, whose interim or annual financial data show, must record accumulated losses of 20% or more of the capital, and disclose it to the market and the Authority in conjunction with the disclosure of these data, while clarifying the main reasons leading to these losses, and the procedures that It will be taken to remedy its situation.

Arabtec has laid off 3,000 manual workers in the past two months, as well as 300 employees, with the company suffering the consequences of the spread of the Coronavirus, and it also reduced the salaries of its current employees between 10% and 40%.

The UAE economy crisis is escalating in light of record levels of deflation and slow growth due to the failure and failure of the ruling regime in the country and the impact of the emerging Coronavirus crisis.

According to the expectations of the World Bank, the UAE economy is expected to shrink by 4.3 per cent, amid estimates that the Coronavirus crisis contributed to a slowdown in the activities of the non-oil private sector further, while he was suffering mainly before the crisis to reach the companies ’conditions to the lowest level ever.

Experts estimated the losses of the UAE economy in light of the Coronavirus crisis at about $52 billion, due to the decline in gross domestic product, business stoppages, the collapse of oil prices, losses of Dubai that depend on tourism, real estate trade, logistics, and export and investment sectors in light of declining levels of global and local confidence.

According to a recent report by Moody’s, the global credit rating agency, the indirect impact of the Coronavirus pandemic on global growth and international trade is a major shock to economic growth in the UAE.

Moody’s expected the UAE to suffer from a severe contraction, and confirmed that the debts of entities associated with the Dubai government are still more vulnerable due to its holdings in the real estate, transportation and tourism sectors.

Before that, the UAE Central Bank expected the country’s economy to shrink 3.6 percent this year, after economic activity slowed due to the Coronavirus pandemic, compared to a growth of 1.7 percent the previous year.

This comes under pressure from the general slowdown in the main activities due to the precautionary measures of the Coronavirus crisis and the failure of the UAE government policies to limit the escalation of the economic meltdown.

The CBE stated in the quarterly report that estimates indicate a decrease in non-oil GDP by 4.1% this year, amid slowing credit and employment growth, lower economic sentiment and a decline in real estate prices.

He noted that the estimates indicate that the UAE’s GDP shrank by 1% during the first quarter, compared to a growth of 0.8% in the fourth quarter of last year.

He added that “the restrictions imposed by the state to control the outbreak of Coronavirus, had an impact on local economic activities, tourism and consumption.”

According to the report, it is estimated that non-oil GDP decreased by 3% in the first quarter of the year, after a recovery in the fourth quarter of last year by 4.4%.

The contraction will be more severe in the second quarter on an annual basis than this year, and then subside in the third quarter with the assumption that the implications of the virus will be contained.

The report suggested that real estate prices decline in the second and third quarters before returning somewhat in the fourth quarter of the year.