As the world battles the alarming spread of the coronavirus disease (COVID-19) through lockdowns, calls for self-isolation and even by imposing curfews, the specter of an impending global recession is looming large. Factories have closed, planes have been grounded, oil prices have plunged and stock markets are in peril amid general uncertainty over how long the global shutdown will last.
Our region has been especially hit as a result of the pandemic. Aside from the decline in energy prices, many sectors are already feeling the pressure — travel and tourism and capital markets chief among them. It is not only that sectors will lose billions of dollars as a result of the lockdown, but there are growing fears many could collapse unless governments step in with generous bailouts and stimulus plans.
Last week, Saudi Arabia unveiled a $32 billion stimulus plan to support its economy, including a $13.3 billion package for small and medium-sized businesses. Other measures include the postponement of tax payments and exemptions from various government levies and fees. For its part, the UAE released its own plan, worth $27 billion, to support critical sectors such as banking and tourism. Lower oil and gas prices have forced Qatar to cough up $23 billion in financial incentives, while Kuwait and other Gulf countries will surely follow suit.
These countries are being realistic and are taking pre-emptive measures. The pandemic could last for months and its reverberations will be felt for years to come. It could affect this year’s pilgrimage season — the Umrah pilgrimage has already been suspended — and may have a negative impact on Dubai’s Expo 2020, which is due to begin in October. Oil-producing countries will face fiscal deficits due to decreasing global demand.
The pandemic has hit vital sectors in Egypt and Jordan, especially tourism — a main source of foreign currency. With the lockdown, experts believe that Jordan could lose the entire tourism season for this year, with a loss of no less than $3 billion. The tourism sector employs at least 55,000. Farmers will be hit as well, as the curfew will affect their ability to deliver their produce. For Egypt, which has closed all tourist attractions and museums until the end of March, losses for the tourism sector alone are expected to be $1 billion a month.
Lebanon’s economy, which had been struggling before the outbreak because of the political impasse, will be especially impacted by the lockdown. Last year’s political instability had already cost the tourism sector billions of dollars. With a serious liquidity shortage, the government will be unable to come to the rescue of ailing sectors.
One of the most serious challenges that many countries in the region face is their inability to honor payments for foreign loans. Lebanon has already defaulted on a $1.2 billion Eurobond payment and asked for loan restructuring. Jordan, where the debt-to-gross domestic product ratio is over 95 percent, will have difficulty meeting its international obligations. Its main foreign currency source from expatriate remittances, estimated at $4 billion annually, will likely be affected.
In short, no country in the region will be immune to the damage that the pandemic will have on its economy. It goes without saying that, for the world to halt the spiral into a global recession, it must come up with an emergency plan to speed up recovery. This is not charity: If even one country fails to fight the coronavirus due to lack of resources, then the threat of a second wave of the pandemic will be real.
The pandemic could last for months and its reverberations will be felt for years to come.
The International Monetary Fund, the World Bank and Western governments must act together to defer debt payments, allow for generous grace periods and even consider debt forgiveness. Countries that have limited resources will need to borrow money in order to launch their own stimulus plans. The way lenders did business before the pandemic will have to change. Solidarity is a must in a globalized world.
Saudi Arabia, which holds the G20 presidency, has called for an extraordinary summit of the group’s leaders next week. As with all other gatherings in the world today, it will be in “virtual” format. On Sunday, the Civil 20 (C20) issued a statement calling on G20 leaders to respond to changes in the labor market and the education system in light of the ongoing coronavirus pandemic. The statement highlighted the recent virus outbreak, as well as the bushfires in Australia, as examples of how global systems can be challenged, leading to inequality between individuals and countries, which the C20 said must be addressed by the G20 states.
Saudi Arabia is in a good position to speak on behalf of poorer countries whose economies are suffering as a result of the pandemic. The issue now is how these countries will recover once the threat of the virus has receded. The world must work on a plan now in order to step in and avoid mass economic chaos.
Osama Al-Sharif is a journalist and political commentator based in Amman.