A second wave of job cuts are likely next year, as the companies have begun to feel the pinch of economic downturn, warns a senior banker, despite currently being in the recovery phase.
The global downturn has witnessed several job losses in the property and financial sectors in the UAE during the past one year, with the commercial and residential property sales being completely dried up.
Further redundancies could lead to more strain in business of banks, which have been already forced to set aside billions of dirhams, ever-since the start of the year, to cover potential defaults.
The Head – Consumer Banking, Standard Chartered, Chris de Bruin, agrees that the biggest challenge that the bank faces are people who have lost their jobs.
The Head – Consumer Banking, Emirates NBD, Suvo Sarkar, also said that it has been a tough time for consumer banks, and the fourth quarter of this year and first quarter of 2010 will also be tough, although second half of next year may get better.
Deyaar Development Company, one of the largest developers in Dubai, cut down 20 percent of its staff, after reporting 74 percent drop in third-quarter profits, up from the same period last year.
Dubai World has axed 12000 jobs (15 percent of staff) to rake in $800 million in the form of savings in three years. Local lenders too would have shed about 1000 jobs, de Bruin pointed out.
“Next year, there will be lot of stress, as people will continue to lose their jobs. We are still on high alert,” he said.
Lack of reliable statistics has made it impossible to accurately assess the number of jobs lost across the Emirates this year. Although several analysts agree that there has been slowdown this year, the fall out from global financial crunch continues to work through the economy.
An analyst at Al Mal Capital, Bobby Sarkar, said there has been a fair amount of turbulence, particularly in unsecured-lending products, credit cards and personal loans. The bank customers across the Emirates are unable to pay back Dh.2.50 for every Dh.100 of lending. This rate may increase to as much as 10 percent for personal loans and credit cards.
The lack of bankruptcy protection in the UAE has made the consumer banks in the UAE, particularly susceptible to job losses. People are unable to manage their creditors, and it is becoming a crisis, as there is no strong legal framework, de Bruin said. Posted on 2/11/2009
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