Top Performing Economies of Arab World Crash due to Lockdowns
Last updated on May 19th, 2020
Business shutdowns due to the coronavirus pandemic across the globe has affected the world economy to an extent which no analyst or economist would have predicted at the beginning of the year. The Arab world is no different, as the virus has severely affected the economies of the three top performing countries of the MENA region.
According to Purchasing Managers’ Index surveys compiled by IHS Markit, Egypt and the United Arab Emirates witnessed a major setback in the non-oil private sector last month due to the coronavirus. Businesses in Saudi Arabia too didn’t see much of growth and remained below the threshold of 50 that separates growth from contraction.
IHS Markit economist David Owen said, Egyptian “businesses lucky enough to remain open scaled back activity on a massive scale, as many highlighted sharp falls in domestic sales and foreign demand. Firms forced to close unsurprisingly recorded an even steeper decline in output.”
The PMIs for these three major Arab world countries suffered a significant drop in April, where Egypt’s PMI nosedived to 29.7, down from 44.2 in March. It was the lowest recorded PMI for Egypt since the series began in April 2011.
Amid the nationwide lockdowns around the world, export demand collapsed due to the travel bans. The UAE’s PMI plunged for the sixth month straight to 44.1 in April – lowest recorded until now.
Compared to 42.4 in March, Saudi Arabia’s PMI stood at 44.4 in April. However, any new orders and employment rate continued to plummet.
As factories shift from Asia to the US, it seems like the road to recover from the biggest crisis since the Great Depression is quite long and uneven. The Arab world is already under pressure amid the dispute because of oil prices and production cuts by OPEC and its allies.
While Saudi Arabia has already announced a reduction of 50 billion riyal (approx. $13.3 billion) in budget spending, Finance Minister Mohammed Al-Jadaan said the government is looking at “painful” choices and deep cutbacks to contain the fiscal damage – which are likely to affect the private sector that majorly relies on government contracts.
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