2009 vs. 2010
As the year comes to an end, Kipp can't help feeling it was a bit of a let down. Maybe if we compare it to 2009, it'll help put things in perspective...
In a fiscally grandiose move, last year Dubai World defaulted on its debt of $23 billion and cast the stability of the UAE’s economy in a rather contentious light. Rumors began to spread and questions were raised about the stability of the city, with whispers of “another Argentina” on the lips of the more pessimistically inclined (Kipp coyly looks away).
A year of negotiation and a tribunal later, Dubai World announced that it has restructured its $23 billion debt with all of its creditors. The settling of the debt has helped encourage confidence in the market, with some analysts predicting an overall growth of 2 percent in the UAE GDP in 2010 (though the numbers aren’t in just yet).
In 2009, although the UAE aviation market grew by 1.9% over 2008, revenues suffered from the lower consumer confidence and purchasing power, decreasing in the UAE market by 15.3%. What is more, 2009 was the year when UAE-based carrier RAK Airways shut down its operations in Bangladesh—after it had dropped scheduled flights in 2008.
Not only did RAK Airways start up its operations again this year, but with Emirates and Etihad increasing the number of destinations they fly to, UAE's aviation sector hit a two-year high, with an average of 1,888 flights each day in November, as reported by the General Civil Aviation Authority (GCAA) in its latest report. With 56,654 take-offs during November, a significant increase of 6.9 percent can be seen when compared with the same period last year.
2009 wasn’t necessarily too bad a year for Dubai’s retail sector: retail sales grew to over $107 billion in 2009 from $104 billion by 2008. 2009 was the year when Dubai’s shoppers trickled into the newly opened Dubai Mall—Dubai’s largest mall, and also the largest mall in the world—but the skeptics were probably right on this one. Dubai couldn’t have picked a worse time to open up a shopping haven than late 2009.
2010 was a better year for the retail sector. With the opening of Mirdiff City Center, CEO of AlFuttaim, Robert Willett said consumer spending in the United Arab Emirates (UAE) has picked up in recent months and retail sales will rise at least 5 percent this year, driven mostly by furniture and car sales. "We're in upper single digits in retail in the UAE this year, in the range of five percent plus, and even further ahead in automotive ... Growth is going to be even better next year," Willett told Gulf News.
With the global tourism sector on an unprecedented low, what with disposable income becoming less disposable, it should come as no surprise that 2009 was a particularly tough year for tourism in the UAE. Abu Dhabi achieved a 2% rise in hotel guest numbers with 1.54 million guests staying in hotels throughout the emirate in 2009, racking up some 4,673,494 guest nights. It was a slow year, but guest stays grew in the final quarter
One needs only to see the number of cameras flashing when the Metro passes by the Burj Khalifa to get a sense of how improved the tourism industry is in 2010. What with the completion of the red line on the Metro, the straightening out of the kinks at the Burj Khalifa and the opening of Ferrari World, it should come as no surprise that tourism in the UAE in 2010 was up by 16 percent.
With the economic crisis hitting the globe in 2008, the trickle down effects were felt less in this region – thanks to UAE businesses being in a state of denial, according to many. Real estate, in particular, was one sector where confidence didn’t seem to be slowing down in the beginning half of 2009, until the inevitable happened in 2010. According to the Kuwait-based Global Investment House, despite the general downturn in the real estate sector globally, in 2009 the construction sector grew by 7.9 percent in the UAE, and the real estate sector grew by 4.3 percent.
If there was one thing the opening of Burj Khalifa, the largest building in the world, signified, it was that Dubai’s real estate market had reached an unprecedented level of saturation. With Dubai Land nearing completion, rents in retail, office and residential areas have been dropping lower and lower. If the real estate market was looking bad late last year, 2010 is looking much worse. Construction on projects has come to a standstill, hundreds have been cancelled, and rents are dipping to ridiculously low levels.
The world in its second year of the economic crisis was in a pretty nasty place. With more and more banks and companies declaring bankruptcy, individuals found themselves losing their life savings and pensions overnight. Stock markets weren’t healthy, either.
The performance of the global economy in 2010 is a tough one to judge—while the economy of Western countries like Greece and Ireland have hit the rocks, the emerging markets of China and India have seemed to be progressing almost untouched by the crisis. Though the markets are volatile, foreign direct investment in emerging markets has been on the rise, though profits may be marginal.
With companies shamelessly defaulting on payments, 2009 was arguably the worse of the two years for the banking and finance sector. UAE banks, like banks worldwide, lost a lot of money, and Dubai World’s defaulting did little to encourage confidence in local banks, with many reporting a drop in net profits. Dubai Islamic Bank, for instance, reported a 30% drop in net profits for the entire year of 2009
If there was a prize for “the almost banking event of the year,” it would have gone to the rumors of a merger between Emirates Islamic Bank and Dubai Bank—which was outright denied by EmiratesNBD CEO Rick Pudner earlier this quarter. There were also rumors of a merger between Noor Islamic Bank with Emirates Islamic, to bail out Amlak Finance, but as of yet nothing has happened. As far as Kipp is concerned 2010 was a better year for the banking industry, with credit being opened a lot more, provisions being cut and a lot less debtors defaulting on payments.