Financial issues in Canada, Dubai and Qatar

Well it would appear that the financial crisis has finally hit Canada. Reports are out that unemployment rose 129,000 in January. That is a heck of a lot of jobs! While the jobless figures in the US got more headlines because 598,000 jobs were lost people forget that Canada only has one-ninth the population of the US, so Canada's job losses would be the equivalent of the US losing more than a million jobs in one month.

Now a recession in Canada was expected. Despite the Canadian banking system weathering the sub-prime crisis better than almost any other Western country Canada exports more than 80 per cent of its goods to the United States. With that kind of trade dependency there is no way Canada can buffer itself against the US recession and it is highly unlikely that Canada will recover until the US does. And not surprisingly the Canadian job losses were mostly in the Manufacturing and Commodities sectors. Here's hoping Canada's stimulus package helps all the newly unemployed.



Qatar appears to be weathering the financial storm much better than most. With its huge capital reserves, small population, and a limited retail property sector, the local banks as well as the government have been cautiously optimistic. There has been a bit of belt-tightening here and there, and anecdotal reports of some job losses, but most of the construction projects are still going and the government remains committed to its current spending budget. I have noticed a slight improvement in the traffic on the morning commute but it is so small I can't really say that it is due to there being less people commuting to work. Sometimes the opening/closing of a road somewhere else in the city can affect traffic patterns, and a co-worker told me two new schools have opened in another part of town so that probably means less parents driving to my neighbourhood to drop off their kids at the nearby schools.

I have heard estimates that the Qatari government could meet its expenditures for the year if oil was $35-$40 a barrel so even if oil stays steady in the mid $40 range the country should be okay. With the current oil prices that does not leave a lot of wriggle room though. I feel more sorry for other oil exporting nations -- countries like Iran and Oman need oil at around $80+ to break even.



As for Dubai things seem are really heading downward. Local reports say that hotel occupancy is down 30 to 40%, and there were rumours that up to 1500 work and residence visas were being cancelled every day. Considering the population of Dubai is maybe 2 million that would be the equivalent of losing around 2% of your population every month! A government minister countered the rumours by making a statement that the net number of visas being issued and cancelled was a 1000 increase a day. Um, that would mean a population of Dubai is increasing by 30,000 a month? Any internet commentary that I have read says that can't be true and that maybe the minister was including tourist visas. But the proof is in the pudding, everyone I spoke to who has either been to Dubai recently or knows people who are in Dubai has said the same thing over and over -- the traffic there has gotten remarkably better. In some cases commute times in the morning have been reduced by 50%. Bars that were once standing-room-only-packed you can now get a table at. Taxi drivers are complaining that there is not enough business. Many hotels have dropped rates by half to try to get guests. And the real estate market continues to drop with no end in sight. Numbers like a 60% drop in real estate prices in 2009 have been bantered around but in reality I don't think anyone really knows where it will settle. A friend of mine is going there this weekend, let's see what he has to say.

Am I surprised? Yes and no. I had been predicting a crash in Dubai on this blog for a while now but I thought it would happen a bit sooner and I certainly didn't think it would be due to a global financial crisis, I just figured the local property bubble in Dubai would burst on its own.

I will keep monitoring what happens there over the next few months, hopefully cash-rich Abu Dhabi or other Gulf state will help bail it out (but that will definitely come at a price) otherwise Dubai is looking at a long, long financial crisis.