By Gavin Gibbon
Survey by The Economist Corporate Network shows almost a quarter of businesses already making redundancies
Almost 40 percent of companies in the Middle East region have already downgraded business growth expectations for 2020 as a result of the coronavirus pandemic.
According to the ‘Middle East: Coronavirus: implications for MENA businesses and their leaders’ survey from The Economist Corporate Network, 44 percent are expecting to downgrade and many are reducing the size of their workforces as a result.
On Monday, the UAE boosted the size of its stimulus package to $34 billion. The cabinet approved an additional support package of AED16bn, bringing the total size to AED126bn.
Despite these measures, more than a quarter (27 percent) of respondents in The Economist’s survey believed Covid-19 will have a strongly negative impact on business and a further 61 percent said it will be “somewhat negative”.
Slightly more than half (52 percent) of respondents expect business disruption to last for more than three months, with a pessimistic 11 percent saying that it will continue beyond six months; while 43 percent of respondents believe the challenge to business will ease within three months.
The disruption caused by Covid-19 is translating into a deferment of investment projects for 51 percent of respondents and a temporary suspension of parts of their business for 28 percent.
Nearly a quarter (24 percent) of respondents said that their business is already making redundancies, and 20 percent revealed that it is enforcing unpaid leave as a result of business disruption caused by the coronavirus.
Almost three in 10 (28 percent) of regional businesses are currently enforcing paid leave.
Robert Willock, director MENA for the Economist Corporate Network, said: “While company revenues and profits, and GDP growth, are all important measures of economic success in normal circumstances, perhaps the dashboard of indicators we should care about right now are health outcomes and support for key workers, as well as unemployment and income protection for families.”
According to The Economist Intelligence Unit (The EIU, a division of The Economist Group), global growth will stand at one percent this year (from 2.3 percent before the outbreak started), as the pandemic affects both supply and demand and limits trade and travel.
GDP growth in the MENA region will be 0.8 percent (2.3 percent), with Saudi at 0.5 percent (1.7 percent) and the UAE at 1.2 percent (2.2 percent), with risk firmly on the further downside.
A sharp fall in global oil demand, coupled with tensions between Russia and Saudi Arabia, have prompted The EIU to revise its oil price forecast: it now believes that oil prices (Brent crude) will average US$45/barrel this year, and recover to US$53.8/b in 2021.
Willock added: “Business leaders, who often have responsibility for the livelihoods of hundreds or thousands of staff, will be doing all they can to minimise the human cost of this pandemic, and will be grateful for any government-provided fiscal support on offer to help with that mission.”
There are currently 1,736 confirmed cases of coronavirus throughout the GCC region and four deaths reported.