The Downturn Hits Dubai

With the Persian Gulf economy shriveling from the oil price drop, Dubai's push to become a global financial hub is in jeopardy
Cranes are erected near the Dubai Marina, where scores of skyscrapers and towers are under construction. The downturn has affected the construction sector in Dubai with reports suggesting that many firms have begun cutting the number of their employees. Marwan Naamani/AFP/Getty Images

For a year or so, the movers and shakers of the small but oil-rich United Arab Emirates have watched the unfolding of the credit crisis in the West with a mixture of dismay and denial. It won't happen here, was their view. And for a long time it didn't. But now it is. The price of oil, the lifeblood of the Persian Gulf economy, has fallen more than 60% since its mid-July peak. Real estate, the other mainstay, especially in oil-poor Dubai, has been quick to follow. An industry source in Dubai estimates that prices, which rose about 14.4% in the first eight months of this year, have suddenly dropped by 20% to 30%, with some developments seeing 50% declines.

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