COVID-19 in the Middle East: An Initial Assessment of the Economic Damage

Published June 3rd, 2020 - 03:00 GMT
COVID-19 in the Middle East: An Initial Assessment of the Economic Damage
Numbers of deaths worldwide are increasingly reassuring the world of a near end to the pandemic. (Shutterstock: NikoNomad)

World economies can crash in a few hours in times of crises, but they don't recover as easily.

This month marks the end of COVID-19 home-stays and the beginning of a new era where businesses are slowly and responsibly reopening.

Decisions of easing restrictions on most businesses have been taken by world governments at the same time the Coronavirus outbreak seems to be more contained than it was during March, April, and May. 

Spain has just reported 0 COVID-19 related deaths for 24 hours for the first time in three months and most Middle Eastern countries are reporting lower numbers of cases every day. 

Despite the World Health Organization's hesitance to support top Italian doctor and researcher Alberto Zangrillo's statement that the novel Coronavirus "is losing its potency and has become much less lethal," numbers of deaths worldwide are increasingly reassuring the world of a near end to the pandemic.

Meanwhile, the global economy is still battling the bitter effects of the virus outbreak. Hundreds of thousands of individuals have lost their jobs and many businesses are in fear of having to file for bankruptcy soon.

In the Middle East, 2020 plans of economic revival have been brutally crushed. Dubai's long-awaited Expo 2020 has been postponed until the fall of 2021 and Saudi 2030 vision has been strongly pressured by sharp plunges in oil prices and massive spending cuts. 

Saudi Arabia

A month ago, Moody's Investors Service cut Saudi Arabia's ratings from stable to negative, citing the oil dip.

Additionally, the richest Arab country's reserves have reportedly fallen by $27 billion in March and another $20 billion in April. Yet, the central bank’s governor, Ahmed Alkholifey told Alarabiya TV channel that the Saudi economy is still relatively healthy and that "the stockpile is still enough to cover more than 40 months of imports", Yahoo Finance reported.

According to IATA, Saudia Airlines are expected to lose 250k workers following travel bans imposed in the aftermath of the viral outbreak.

UAE

Unfortunately, the Middle Eastern business hub that has been the dream of millions of businessmen and entrepreneurs has also been hit hard by COVID-19, in spite of the diversity of its resources.

A recent study conducted by the Dubai Chamber of Commerce surveying 1,228 CEOs, found out that 70% of small businesses in the Emirate expect to close their doors within six months from April. 

Hotels, restaurants, and transport services are amongst the most struggling sectors in Dubai, the survey found.

On the other hand, surviving companies are still expected to take severe measures to contain the financial crisis, including slashing salaries and laying off employees, which could eventually affect the country's demographics, as millions of foreign expats make up more than 88% of the country's population 

Egypt

The most populated country in the Middle East is still in the eye of the storm when it comes to COVID-19.

Nearing 30k confirmed cases and experts' speculations that the real number might be 10x higher, Egypt has been forced to ease lockdown restrictions so as to prevent a financial collapse, in the country that has been struggling with economic hardship for years. 

Since mid-March, the Central Bank of Egypt has taken several measures to curb the negative economic impact of the health emergency, including "ordering local banks not to impose additional fines on late payments of non-performing loans, in addition to directing them to postpone credit dues for institutions and individual clients, for a period of 6 months," Egypt Independent reported.

According to the Egyptian Center For Economic Studies - ECES, COVID-19 has cost the tourism sector in the country more than $6 billion, about 35% of the expected revenue for 2020.

Jordan

A study conducted by the Phenix Center for Economics & Informatics Studies found that 40% of Jordanians have reported complete loss of their jobs during April and May of 2020, as a result of strict lockdown rules imposed in the country.

The country was already suffering from a high unemployment rate prior to the novel Coronavirus outbreak approaching 19% by the end of 2019. Additionally, thousands  of Jordanian expats who were working in the GCC countries have reportedly been laid off and will soon have to return to Jordan.

Remittances of about a Million Jordanian expatriates, mostly in the GCC region, have for decades supported the Jordanian economy with more than $4b a year. The Central Bank of Jordan has reported a 5.4% drop in cash transfers to Jordan during the first quarter of 2020 compared to the same period last year, pointing at the possibility of a strong negative impact on the local economy.

Iraq

Just like other oil-rich countries in the region, Iraq too has felt the major implications of the oil market crash, influenced by travel bans and global lockdowns, in addition to the Saudi-Russian disagreement last March, which flooded the world with unneeded amounts of oil.

Iraq's State Organisation for Marketing of Oil has announced that the country has lost $11 billion in oil revenues since the outbreak.

Despite the government's announcement of a $25 monthly stipend per household to help more than 13 million Iraqi who applied for aid, the poverty rate in the country with the 5th largest oil reserves worldwide has reached 30%, government sources revealed.

Palestine

In a report released last Monday, the World Bank has warned that the economic strains triggered by the Coronavirus outbreak could double the number of Palestinians living below the poverty line from about 14% to a staggering 30%, mostly as a result of Palestinian workers being denied entry to Israel since the viral outbreak during the months of March and April.

According to the World Bank, the Palestinian economy could shrink between 7.6 and 11 percent for 2020.

Despite these dark figures, easing restrictions and gradual business re-openings are boosting hopes of a quick economic recovery and for new investment approaches that could eventually create new opportunities and enhance economic growth in the post COVID-19 era.


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