| CORONAVIRUS-HIT GLOBAL ECONOMY POISED TO REBOUND |
The global economy will face an enormous shock, leading to steep recessions in many countries due to COVID-19, according to the World Bank.
The multilateral organisation’s baseline forecast projects a 5.2% contraction in global GDP in 2020 – the deepest global recession in decades.
Like the rest of the world, the Middle East and North Africa (MENA) region will also see declines, although less pronounced than the global economy.
“Economic activity in the Middle East and North Africa is forecast to contract 4.2% as a result of the pandemic and oil market developments,” the World Bank said in its June assessment. “In many oil exporters, growth will be significantly constrained by policy cuts in oil production. In Gulf Cooperation Council (GCC) countries (-4.1%), low oil prices and uncertainty related to outbreaks of the virus will further weigh on non-oil activity. Economic activity among oil importers is expected to contract by 0.8% in 2020, as tourism and exports decline.”
However, the bank believes growth in oil exporters such as Saudi Arabia will rebound in 2021, as the shock from the pandemic subsides and investment recovers, including large infrastructure developments in the GCC.
“Longer-term diversification programmes, the recent relaxation of foreign investment restrictions, and improved regulatory environments should also support the rebound, including a recovery from adverse global spillovers and low confidence,” the bank noted.
The World Bank expects the Saudi economy to contract 3.8% this year – a more moderate decline compared to its MENA peers, and rebound more robustly at 2.5% expansion in 2021 (versus 2.3% in MENA).
LEARNING FROM MERS
Saudi Arabia is well placed to address the pandemic. Apart from the government’s fiscal strength and ability to support the economy, the kingdom has also had experience in managing health crisis.
In 2012, the kingdom was hit by the world’s last major coronavirus outbreak prior to COVID-19, the Middle East Respiratory Syndrome (MERS), which caused over 800 deaths across the region.
“The experience gained during the MERS outbreak meant that Saudi Arabia was better prepared to tackle the novel coronavirus,” the Ministry of Investment said in a report. “The kingdom’s hospitals, for example, were already equipped with specialised triage and ventilation units to protect medics from the infection, drive-thru testing units were already in place, and epidemics guidelines had been drawn up in accordance with WHO’s (World Health Organization) best practice.”
Learning from that experience, the kingdom launched a smart app for COVID-19 consultations and contract tracing, and the Ministry of Health also initiated campaigns to raise awareness. More than half a million Saudi citizens and residents have used the app.
In addition, the government ensured that supply chain remained robust and consumers had access to food and other essentials in an affordable way. The Saudi Ministry of Commerce conducted 73,000 inspections of warehouses, while a consumer call centre set up by the ministry received 84,000 complaints primarily focused on price increases in fruits, vegetables, masks and sanitisers.
G20 LEADERSHIP
Even while it was focused on domestic needs, Saudi Arabia also led the G20 response to the crisis, as its holds the presidency of the group this year.
Saudi Arabia and leaders of the world’s 20 largest economies co-ordinated their response to fight the pandemic, safeguard the global economy, and enhance worldwide co-operation.
In April, Saudi Arabia pledged USD 500 million to key organisations fighting the COVID1-19 pandemic. These included USD 150 million to the Coalition for Epidemic Preparedness and Innovation, another USD 150 million to the Global Alliances for Vaccines and Immunizations (GAVI) and USD 200 million to other international and regional health organisations and programmes.
CHANGING BEHAVIOURS
Lockdowns and remote working has also accelerated a number of changes that were already occurring in global and Saudi economies before the pandemic. Online shopping, focus on ecommerce and digitisation, were boosted during the crisis and it will remain long after the coronavirus has faded from memory.
“A shift in consumer behaviour towards e-commerce, with 95% of Saudi consumers increasing their online shopping, according to a recent Kearney Middle East survey,” the Ministry of Investment noted.
There has also been a major move towards cashless payments, while consumers embraced food delivery apps, that has boosted food and beverage, retail, and business-to-consumer logistics sectors.”
Internet data consumption, for example, jumped 37% in April compared to March, while average daily data consumption in April jumped to 940MB, compared to 600MB in February.
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