The Story Of Dubai's Fall From Grace
Visitors to the city confess that one could see a pall of gloom enveloping the Emirate during most parts of 2009 with empty ports, unfinished skyscrapers, vacant commercial complexes that outlined the story of a bubble going burst. The desperation is palpable as the carnage has exposed the overleveraged character of Dubai"s economy. It became clear that Dubai is a classic instance of syndrome which affects emerging markets. The kind of hot money which descends into an economy to gain the highest returns and then disappears just as fast at the slightest hint of a slowdown, a kind of malaise which afflicted the Asian Tigers in the bloodbath years of 1997-98Dubai has suffered badly from the reckless speculation in real estate markets by its elite who were used to buying and selling property within a matter of weeks by leveraging free-flowing mortgage money. Dubai was not only the recipient of foreign capital but had invested heavily in promising investment destinations all across the globe. But the interconnected nature of today"s global economy ensured that the carnage which hit financial markets in Europe and America travelled to the shores of Dubai. The rising oil prices had to some extent insulated Dubai from the crash but not for long as global demand for oil plummeted; plunging prices to an all time low in a span of four months.
Gold prices, dipped as a consequence further eroding the confidence of investors in the solvency of Dubai"s economy and its ability to meet its obligations. Vast majority of people were rendered unemployed and migrant workers sent back home. The resultant slowdown exposed the indebtedness of Dubai"s economy which was running a debt of $80 billion on an asset base of nearly $350 billion. Foreign institutional investors panicked and began rethinking their investments in the emirate leading to major construction projects being stalled in Dubai.
The recession somehow hasn"t dampened the appeal of this desert paradise amongst holiday makers. Millions of tourists even today visit online travel portals to search for cheap holidays in Dubai. Travel agents know that Middle East still remains their best bet for customers looking for short haul destinations and continue to offer cheap holiday deals to Dubai. However, as the year 2009 ended and 2010 began, one could see Dubai"s economy stirring back to life with share prices of most companies experiencing an upward swing.
Economist"s hope that Dubai, in the next few months, will reclaim its economic might and bounce back as the ò€˜Land of Opportunity" it once was.