It’s official. There is no escaping this one, guys. With words like the “The Great Lockdown” headlining the IMF Blog and followed by: “Worst Economic Downturn Since The Great Depression”, it looks like pandemonium will follow the Corona Pandemic.
But for those in the GCC, there is some good news.
First the numbers.
It’s going to feel like arrows raining down, and some of them really hurt.
The new from the US, the number one economy in the world and a barometer of things to come, is devastating.
JPMorgan cut its second-quarter US GDP forecast even more, with its economists now foreseeing a 40% decline. Morgan Stanley expects GDP to fall 38%.
Over 22 million Americans have filed for unemployment benefits in the last 4 weeks.
JPMorgan says virus could cost world at least $5.5 trillion in lost output, equal to almost 8% of global GDP.
Gita Gopinath, the IMF’s chief economist, said the crisis could knock $9 trillion (£7.2 trillion) off global GDP over the next two years.
The IMF expects the eurozone economy to shrink by 7.5 percent in 2020, and to rise by 4.7 percent in 2021.
More than 1 billion workers are at high risk of a pay cut or losing their job, according to the International Labor Organization. Lockdowns are affecting almost 2.7 billion workers with 38% of the global workforce being extremely vulnerable, mainly in the hotel, food service, manufacturing and retail industries.
An oily mess
The global oil industry suffers from disappearing demand, oversupply, and unprecedented glut of crude.
WTI plunged to below $20 from around $60 per barrel at the start of the year. Brent is below $30.
The International Energy Agency (IEA) said in April alone, demand will be down 29 million barrels per day from a year ago.
Countries including China and the U.S. are considering filling massive underground storage caverns with crude, taking advantage of low prices and helping relieve the pressure on other storage and transport systems. Tankers, usually used to transport oil around the world, can also be used as floating storage, and they are.
Light at the tunnel’s end
The IMF expects global growth to rebound to 5.8% next year if the pandemic fades in the second half of 2020.
In an optimistic scenario, the WTO forecasts merchandise trade may fall 13% in 2020 and rebound 21% in 2021, while in a pessimistic case volumes could drop by as much as 32% before increasing 24% next year.
The World Bank is prepared to spend up to $160 billion over the next 15 months to support the “economic rebuilding that needs to be done” because of the pandemic, according to World Bank President David Malpass telling CNBC on Wednesday.
Regionally, Lebanon, is expected to have one of the worst-performing economies in 2020, declining by 12%.
But the report expects Egypt will be the only Arab country to register economic growth, which is expected to be 2% in 2020 and to jump to 2.8% in 2021.
The Saudi Arabian economy is expected to decline by 2.3% in 2020, and to grow next year by 2.9%.
The IMF expected a similar situation for the UAE, saying that its economy will contract in 2020 by 3.5%, and will rise 3.3% percent in 2021.
Kuwait will only experience a drop of 1.1%.
Across the MENA region as a whole, the decline is set to be 3.3%, some 5.9% points lower than forecast by the IMF in its previous World Economic Outlook in January.
However, most of the Gulf countries have enough financial firepower to cope with the challenges they now face, according to Forbes.
In a recent research note, Ahmed Esam, assistant economist at Oxford Economics, said “GCC countries, with the exception of Bahrain due to its affected manufacturing sector, are the most resilient in the MENA region to structural shocks owing to their stronger economic positions. North African countries, as well as Jordan and Lebanon, are the most vulnerable.”
Esam pointed out that GCC economies have better-equipped healthcare systems to handle outbreaks of the virus.