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Thu 30 Apr 2009 01:50 PM

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Swine flu pandemic may hit UAE, Oman economies

Confirmation of virus in region would weigh on the GCC's tourism sector - EFG.

The economies of the UAE and Oman could be hard hit by a swine flu pandemic, EFG Hermes warned on Thursday.

In the GCC, tourism is a major contributor to GDP in the UAE and Oman and confirmation of any cases of the virus would weigh on the already troubled sector, as well as on the oil price as people cut back on travel.

“While no cases of swine flu have yet been reported in the main MENA countries in our coverage universe, we would not be surprised to hear of such cases appearing in the coming days or weeks given the rapid spread of the disease so far,” analysts at EFG Hermes wrote in a note to investors.

Tourist numbers fell by 50 to 70 percent in areas affected by Severe Acute Respiratory Syndrome (SARS) in 2003, and hotel occupancy declined by over 50 percent in the initial months of the crisis.

Air travel could also decline as a result of a swine flu pandemic, the regional investment bank noted.

Most of this impact would be felt on long haul routes but regional airlines such as Jazeera Airways and Air Arabia would also be affected, more than offsetting any positive impacts from lower oil prices.

"While we are not reducing our oil price assumption of $50 per barell for Brent crude in 2009, downside risk remains depending on the severity of the flu outbreak,” the analysts said.

Still, GDP only fell by 0.6 percent in the South Asian countries as a result of the SARS crisis, which in the GCC would be a negligible number compared with the challenges posed by fluctuations in the oil price, the bank said.

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