Please read “What happens in a recession” before you read this.

So how does a typical recession scenario compare to Dubai and the UAE? And what can the UAE do to minimize the impact?

1. Interest rates in the UAE have sky-rocketed as banks have seen loans and mortgages as high risk – making LESS funds available to the consumers and companies, fuelling the risk of recession in the UAE – and stopping the real estate market. This reaction is hurting the market a lot.
   
   When a bank sees a loan as high risk, they increase the Interest rate. When Banks can see low risk, they have lower Interest rates. Banks also increase the “spread” between what you get when you deposit money in the bank and what you can borrow money for. A low spread between deposit interest and loan interest is equal to a secure market. The larger the spread, the more the Banks are scared of the future.
   
   So the UAE needs to get the Interest rate down not to amplify the risk of recession here and make money available for the consumers and real estate market.
   
   
2. People travel less in a recession. Since 17-22% of Dubai GDP is based on tourism, the impact here will be harder than in a country where only 5-10% of GDP is based on tourism. Tourist based economies are some of the hardest hit in a recession.
   
   Tourist destinations must change their approach to get people to the UAE. Lower prices, better offers, more “value” is essential for attracting the visitors who now have a smaller budget to travel for. 
   
   
3. When people lose their jobs, they spend less. But in the UAE when people lose their jobs, they also risk losing their visa, forcing them to leave the country within 30 days of visa cancelation. So hardly enough time to find a new job in a market downturn. So in the UAE spending from unemployed will not just be less – the spending will completely disappear, leading to more people losing their jobs.
   
   
   So losing your job in the UAE and not being able to find a new one before visa cancelation leads to:
   1. You have to get out of your flat/house. If you paid 12 months up front for a rental property, you don’t might not get any money back. You might have to sell your house if it did not come with a residence visa and you can’t afford to keep it without a job.
      
   2. You need to sell your UAE possessions, like cars, tv, boats, furniture etc.
      
   3. You need to settle credit card bills, Electricity and Water, Phone lines, TV, Internet and all other bills you might have BEFORE you check out of the UAE.

The above will lead to EVEN lower prices on property, lower prices on 2nd hand cars, lower prices on all other 2nd hand items.

And since you are under hard time pressure to get rid of your assets – you will be forced to sell at any available price you can get.

People with cash are Kings in a recession.

So in short – losing your job in the UAE can be a disaster for your personal life and can leave you with a lot of dept. But it will also impact the UAE in a bad way.

And since an estimated 15% of tourists to the UAE are relatives and friends coming to visit YOU – and spending money in the UAE economy, these visitors might be lost, impacting even more.

So this is an even more vicious cycle than a “normal” recession and if nothing is done the potential recession can hit the UAE harder than the western markets, despite the government having plenty of money.

To stop the outflow of people and local revenue, the visa rules need to be changed in the UAE or we can face very hard consequences for the local economy.

You can ready this article for some more pointers on what happens in a recession and what you can do to combat it.