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MEANING OF RECESSION
A period of general economic decline; typically defined as a decline in GDP for two or more consecutive quarters. A recession is typically accompanied by a drop in the stock market, an increase in unemployment, and a decline in the housing market. A recession is generally considered less severe than a depression, and if a recession continues long enough it is often then classified as a depression. There is no one obvious cause of a recession, although overall blame generally falls on the federal leadership, often either the President himself, the head of the Federal Reserve, or the entire administration.
REASON
The Burj Dubai now being completed and
officially the world's tallest skyscraper,the developer Emaar, announced that it might be shelving plans to continued with the Downtown Burj Dubai project.
scheme which would include 30,000 homes, nine hotels including the Burj Dubai Lake Hotel, 7.4 acres of parkland, 19 residential skyscrapers, a shopping mall and a man-made 30 acre lake. However, Emaar had stated that investors had transferred payments earmarked for the residential high-rise buildings to other projects after sales dried up
Downtown Burj Dubai development has been hit hard by the economic downturn, which in turn has forced Emaar and other developers to put certain projects on hold, allowing investors to may have already paid deposits to transfer them to developments that are set to go ahead.
EFFECTS
BANKS
The four banks affected are: Emirates Bank International PJSC
(EBI), National Bank of Dubai (NBD), Mashreq bank (Mashreq) Dubai Islamic Bank (DIB)
HOLLYWOOD
Plans to roll out a film- incentive were on hold Hollywood involvement in ventures including
Dubailand & planned film partnership did not proceed , as their was uncertainty of plans coming in action The credit crunch was wrecking Dubai s plans to become a major Hollywood player .
STOCK MARKET
Markets in Dubai ,part of the United Arab
Emirates had fallen gradually Some major securities ,including the construction &Banking shares ,fell to almost 10% The Dubai government had indicated that they were not willing to take responsibility for Dubai World's debt
LAYOFFS
It was a law that expats were fired from
the jobs in Dubai Dubai employees fired Indian migrant workers through texts The real estate, architecture , design engineering & market sectors were the hardest hit Massive job cuts in Dubai's hospitality and tourism industry
REAL ESTATES
Layoffs in real estates have out numbered
all other jobs in the areas in Dubai Property prices in the emirate had fallen 50% from their peak Credit has become scarce in Dubai and projects have been halted in mid-spire
FINANCIAL CRISIS
The Dubai government had indicated that it was not
willing to take responsibility for Dubai World's debt. International investors are furious as they had paid high prices for the bonds with the belief that they had the backing of the Dubai government. However the government had announced that it had no intention of selling off any of its own assets to help out the struggling Dubai World.
World and its subsidiaries had made use of short-term loans to finance their long-term building projects. The repayment periods were now coming up and the companies were not in a position to meet their obligations at this stage
The world went a little into shock when there was talk that Dubai could have financial issues. Currencies have fluctuated all over the world which has had an adverse effect on everything from living to travel. In Dubai, $3.52 billion of Islamic bonds fell to a record low 45 cents.
working hours Property development companies had cut their advertising budgets Real estate agents had seen sales plummet causing them to lay off up to 75% of their brokers Significant Dubai based companies had not only suspended their recruitment programmes but had actually laid off their HR departments!!! Rumors had been circulating that property developers would likely had to default and the construction companies may had to withdraw from sites due to lack of payment. Debtor days had increased substantially
month payment delay for its loans . The crisis will become an insolvency issue, which means if Dubai shows that it is going bankrupt. Then it would have dramatic impact globally. Yet there has been no impact on INDIAN industry which means it is not a case of sovereign solvency change.
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