Oil prices, travel and tourism are vulnerable to the effects of the coronavirus.
The impact of COVID-19 and the 50% drop in oil prices since the pandemic struck will challenge all of the economies in the Middle East region. Travel restrictions and a simultaneous drop in domestic and external demand are hitting the region hard. There are bright spots, nonetheless, and reasons to expect this part of the world to remain resilient, with help from strong foreign exchange reserves in the big oil-producing countries.
Egypt remains the fastest-growing economy in the region, thanks in part to its growing natural gas exports, but also due to reforms designed to support and expand the private sector. It is hardly immune, however, to the effects of the coronavirus. Cancellations in the tourism industry have reached as high as 80%.
The hit to Dubai’s economy could worsen if the emirate is forced to postpone the World Expo, the first in the region, which is scheduled to open for a six-month run in October. The expo could provide a much-needed jolt to the economy, especially in the hospitality and retail sectors. Neighboring Qatar’s economy is showing some buoyancy as a result of rising natural gas output, although the recent decline in gas prices means that economic growth will be restrained.
Oman’s sluggish economy and high debt will no doubt challenge Sultan Haitham bin Tariq, the country’s new leader. However, he has strong business credentials and ambitious development plans. In energy-poor Jordan, which benefits from lower oil prices, a new IMF funding package and anticipated economic reforms offer a ray of hope for a more sustainable future.
The region’s young, tech-savvy population is one reason the startup ecosystem is booming and attracting funding. The bulk of the activity in fintech is in payments, money transfers and remittances. Most bankers believe the benefits outweigh the risks when sharing information and collaborating against financial crime. Lebanon and its banks reached a dangerous precipice in March, and both need to make tough choices. The positive aspect is that the country’s banks will be forced to play their role as financial intermediaries, taking money from depositors and reinjecting it in the real economy.