By Saima Gul
Your commercial awareness dose
Covid-19, a virus that quarantined entire cities of the world, became a global
pandemic – it changed the world completely. All cities – businesses, schools,
trade travels were closed and flights were cancelled. The whole global economy was on the verge of the collapse and the Middle East was no different. From closing businesses, a high level of unemployment to collapse in oil prices, Corona virus affected the economy of Middle East adversely.
The Covid-19 became a significant challenge in the region. The region is facing
twofold crises; Despite the pandemic, the economy is also hit by oil prices. The health
infrastructure has almost collapsed completely. Growth in the region is now declined to
4.7%. Local governments have to take serious steps to overcome the crisis.
The most major issue they are suffering is the drop in the oil price as most of the region’s revenue flows from the oil sector.
Crude Oil or petroleum products are the major exports of the Gulf countries. The
sudden reduction in oil prices due to the pandemic situation is dragging the
economy of oil-producing countries in the Middle East to collapse. Crude oil prices
have fallen bellow 30$ per barrel. The decline in oil price lowered economic growth
of Kuwait to 0.8% and of the UAE to 0.6%.
Oil-producing countries in the region are expected to have lower economic growth rates in the year 2020. Large financial savings will provide some temporary protection from fiscal pressure arising from the oil price reduction. For the long term, rescheduling of economic policy like incentivizing private sector and reduction of complete dependence on oil and gas will be needed.
Apart from the oil price shock that lead to a budget deficit, another major issue occurred
due to Covid-19 is the historically high levels of unemployment in the region. It is stated that these issues will shave off 12% of the region’s economy. Countries like Saudi Arabia, UAE and Qatar that are heavily-reliant on expat workforce are facing an increase in the levels of unemployment.
The growth rate is expected to fall 10% as the cities are still unable to open completely, whilst most of the business are still closed. Hospitals are full to their capacity. People are
afraid to get out of homes due to prevailing infections. The chances remain high that some significant local companies will go bankrupt as businesses are unable to operate.
The UAE and Saudi Arabia are also suffering due to the travel ban. UAE receives 17 million travellers every year and Business Expo is one of the country’s main events, which was meant to be held in October 2020. Although the country was expecting up-to 30 million tourists this year, it is unrealistic to expect the travel industry to recover anytime soon because of the pandemic. This will inevitably have significant repercussions for the region’s general economic circumstances.
Saudi Arabia also welcomes more than 20 million pilgrims (religious visitors) on an annual basis. This sector contributes to the kingdom’s GDP considerably, however, Hajj and Ummrah (religious travel visits in Islam) are banned due to pandemic . Flights closed, airlines are in loss – this had a profound impact on the real state and hotels sectors as well. People are unable to go out for dine-in and other recreational purposes.
It can be strongly asserted that the Middle East region will need large-scale policies to overcome the loss they suffered due to pandemic. Re-opening of cities will take time and more time for business to overcome the loss and pay debts.
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