By Omnia Al Desoukie
Dubai, Mar 12 (efe-epa).- The Covid-19 outbreak has sent financial tremors through the Gulf nations as governments, which rely heavily on oil exports to China for trade, try to ease pressure on consumers while bracing for economic damage brought by the drastic measures needed to contain the virus.
Members of the Gulf Cooperation Council have offered price freezes, payment delays and bailouts to help consumers and businesses foot the bill of the economic impact of the novel coronavirus.
But Gulf nations must also mitigate knock-on effects of global economic factors as countries close borders, trade drops off, oil prices slump and the private sector enters crisis mode with economies worldwide are projected to drop.
“We are headed for a severe global economic recession this year, especially as we enter the 3rd quarter,” Taufiq Rahim, a senior fellow at New America, said.
“Unless there is a drastic change this summer in the course of the coronavirus pandemic, you can expect severe volatility and a general downward trajectory for the markets.”
The Council countries, comprising Bahrain, Kuwait, Qatar, Oman, Saudi Arabia and the United Arab Emirates, depend heavily on natural resources such as oil and natural gas.
“With financial reserves and prudent leadership, Gulf countries can come out of this crisis positioned to recover,” Rahim added.
Gulf countries have drawn up a variety of measures to deal with the impact of Covid-19 but all have called for calm.
Oil prices further dipped after OPEC+ talks failed to agree on a production cut, sparking tensions between producers. Stock markets also dived on Thursday in a week where trading has been halted twice in at least two exchanges.
“The main option of Saudi Arabia, Abu Dhabi, Bahrain and Kuwait/Qatar is to open some of the doors of their respective Sovereign Wealth Funds, such as ADIA, Mubadala, QIA and KIF,” said Cyril Widdershoven, director of Verocy, an Integrated Risk Consultancy focusing on MENA.
They can prevent a meltdown by injecting part of their available cash in the economies,”
Earlier in March, central banks in the Gulf cut key interest rates following the 0.5 percent rate cut by the US Federal Reserve, an emergency response to the impact of the virus on economic growth.
“I suspect that this major exogenous shock presents an opportunity to urgently progress further measures aimed at diversifying the region’s economic fortunes to better withstand future economic volatility,” said Nichola Johnson, principal economist at Economists Without Borders.
However, key non-oil sectors such as tourism, hospitality, are coming under extreme pressure.
China is a major energy importer from the Gulf and economic cooperation between China and the Council has been increasing over the years with the advent of the Chinese Silk Road Project.
Gulf economies have therefore depended on the oil importer giant for decades and much of the products are imported.
“A stimulus on the level of 2008 will be required to stabilize markets in many countries,” Rahim added.EFE-EPA