How Bad is the Economic Crisis in the Middle East Amid COVID-19?
Last updated on April 17th, 2020
Apart from creating an economic crisis around the globe, the coronavirus pandemic has disturbed the daily lives of billions of people. The Middle East region too has been caught amid the turmoil of the virus.
The economic impact of the pandemic is being majorly felt by the less diversified economies – the oil producing nations of the Middle East.The Middle East is divided into two sets – strong oil-producing economies like the UAE, Kuwait and Saudi Arabia, and the politically unstable nations like the Iran, Syria and Iraq.
As a result of sinking oil prices, these countries have been witnessing a major drop in their economies. Last week, the price per barrel fell to an all time low of US$25 per barrel. The ongoing price war between Saudi and Russia is also to be blamed for the drop in demand. Both the countries are yet to agree on a reduction of production to stabilise the prices.
Saudi Arabia, Kuwait and the UAE have reduced their growth down to 0.7 percent, 0.8 percent and 0.6 percent respectively. Saudi Arabia is the first G20 nation to have announced budgetary cuts in the order of 13 billion US dollars.
In order to maintain the production, the US Department of Energy has been considering to rent out Federal facilities to domestic producers. All the eyes are on the White House to ban the import of foreign oil and impose tariffs to stabilise the price and balance the economic crisis.
Considering the barrel price of US$40, the Institute of International Finances estimates that the current pandemic will cost the Middle East and North Africa region approximately $192 billion in the short-term.
Apart from the oil industry, Saudi Arabia’s fledgling retail sector employing around 500,000 people has also been affected and shut down during the crisis. Middle East, known for its tourism industry, has been hit hard with no tourists arriving since March. The Haj pilgrimage in July is likely to be cancelled this year.
War-hit country Yemen has the worst consequences of the outbreak. The country could soon turn into a hotbed for infections.
During this hard time, strong diplomatic relations between the countries of the Middle East are necessary to save the region from a horrible economic crisis.
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