One of Dubai's biggest investment companies, Dubai World, has asked for a six-month delay on repaying its debts, raising fears among investors about the financial health of the emirate.
Following six years of rapid growth, the Dubai economy has slumped since the second half of 2008, which has led to property prices falling sharply.
Here, Dubai residents describe the changes the worsening economic situation has brought and what lessons can be learnt.
KEVIN DRAPER, FOUNDING CHAIRMAN OF A COMPANY
In 1996 I established a company in Dubai which designs and builds exhibition stands.
After 12 years of impressive growth it was valued at £18m earlier this year. It's a high-profile company with high-profile clients.
A takeover was imminent but the economic collapse changed everything in less than one year. Client budgets were slashed and as a result we had to take a 60% reduction in our sales turnover.
I am currently in the UK living with my elderly parents and seeking investment to be able to continue trading. It's a riches to rags story.
I have a house in Dubai, which is in a great development with fantastic views. I am trying to sell it at the moment, so that I can invest in my company. The falling property prices mean that I'll lose money on the house too.
Dubai was overheated in the property sector, there was so much speculation going on. I don't think development will continue in the same way.
I haven't given up on Dubai. It's a great place to live
Most importantly, I think some laws need to change. One of the biggest challenges businesses and individuals in Dubai face is that a debt payment delay is a criminal offence. You can go to prison for a bounced cheque.
There are many British expats in jail right now because they've delayed their debt repayments. This is exactly why people are leaving overnight and abandoning their cars at the airport.
Many of my staff have been jailed. Because of delays of business transactions I could face immediate imprisonment as soon as I fly back into Dubai. I could also be prevented from travelling back to the UK. It is a terrifying prospect.
The punishment is so severe and I think that this is definitely a contributor to Dubai's problems. It's an old law that needs to catch up with the economic development of the country.
But I haven't given up on Dubai. It's a great place to live. I am currently employing 140 people there and will continue to try to make it a success. I am sure that Dubai will sort out its problems.
SARAH, WESTERN JOURNALIST
Six months after I bought a flat, it lost more than half its value. I'm trapped here - even if I rent it, the rental income won't cover my mortgage payments.
Lots of people have left - my neighbour, an architect from the US, was fired and her whole company shut down.
You see cranes and construction material everywhere, but nothing is being built. The airports are empty.
There are not that many people when you go out shopping, and there are almost no Westerners in the bars and clubs.
All the big Dubai events are gone, and it's more about Abu Dhabi these days. It's like something's died and the city is in mourning.
MATTHEW, PERSONAL TRAINER
Dubai World has fuelled the emirate's rapid economic growth of recent years
We moved to Dubai two years ago. One of the questions we asked ourselves was how is this property boom sustainable and who is going to live in all these tower blocks.
Friends already living here assured us that if you build them, they'll come. They even urged us to invest - thank goodness we didn't.
There are lots of rumours of buildings that have been empty from the moment they were built. I know a few tower blocks that are never lit up in the evenings.
So I think Dubai has made mistakes and what we see happening here is not only down to the global downturn.
Many people have left - mostly people employed in the construction and property industries. Quite a few guys from the rugby club have left.
We are not affected personally, as neither of us work in industries hit by the recession. This is not to say we aren't watching the pennies.
We are worried, of course, but I am sure they'll turn it around. There's too much money invested here to let it all go wrong.
The word out there at the moment is that Abu Dhabi will bail Dubai out and people here are confident that sooner or later it will happen.
ANONYMOUS BUSINESSMAN, TEXTILE INDUSTRY
This news doesn't come as a surprise to anyone here, although the government has kept quiet on the subject and people don't discuss it.
We've been concerned about the situation for quite some time. Since July we've had two increases in our electricity bills. Our monthly bill was £15,000, now it is nearly £30,000. That is a massive industrial price hike and it's totally unjustified in this oil-rich country.
Everyone is aware of the situation, but people don't dare talk openly about it. Everyone is worried.
I am quite pessimistic. I don't think it will get better soon, it will take at least five years for the economy to recover
The property market has crashed - we weren't involved in property, but many people did get involved and many people left overnight. If you go to the airport you'll see many abandoned cars.
I myself know a few people who are no longer around. It makes you wonder where did these people go.
The personal debt situation is very worrying. Leaving the country is the obvious solution for the foreigners - there are no loyalties, no families to stick around for, so people leave overnight.
I am quite pessimistic. I don't think it will get better soon, it will take at least five years for the economy to recover. Everyone is affected - the banks, the economy, the industry, individuals.
I think this will be the end of the Dubai dream. They'll definitely introduce taxes from next year, there are no more gaps to fill in the market, other places are cheaper to run businesses and the industry will dry up.
They've got to get together in Abu Dhabi, they need to bail us out. Otherwise, it's not looking good.
We are thinking of shifting the business elsewhere - perhaps to the subcontinent.
ANDREW, MANAGING DIRECTOR OF A COMPANY
I have to say, I think the West and the UK in particular focus too much on the negative stories from Dubai.
Like all places, Dubai has been hit hard by the global financial crisis. But believing rumours of 5,000 cars abandoned at the airport, which has only 1,950 parking spaces, is a case of not letting the truth spoil a good story.
Is the request to delay payment damaging? Potentially it is, but it's a brave strategy and will see what will emerge out of it now that the information has been put out there in the region.
I am affected by falling house prices in the UK, not in Dubai. The falling property prices here result in cheaper rent, which is good for me.
And of course our business has been affected and like any businessman I am worried about the world economy. We are working twice as hard for less return, but I am optimistic about the future.
The days of building big buildings to fill them with people who are going to build more buildings are gone.
Dubai now needs to reinvent itself. It needs to move on, put property speculation behind and aim at building a service economy.
We have no rain, no tax and no jury service. I can think of many worse places to be.
REBECCA, TEACHING ASSISTANT
The news didn't come as a surprise. People have been talking about the bad state of the economy for a long time.
We haven't been affected personally, we are only aware that we need to look after our savings. We bought our house about five years ago and although house prices have dropped, the value of our house is still higher than the price we paid.
But I know many people who lost their jobs and businesses and fell into debt. We lost many friends this year. This is the sad thing for us. People who have debt leave without telling anybody.
I feel unsure about the future of Dubai. When I was listening to the news this morning I was thinking, if things get worse, maybe we should consider moving. It's not what I want to do, but the thought crossed my mind.
As my husband says, Dubai has been going too big too fast and now there are not enough funds to sustain this development.