Three of the biggest Arab economies buckled in March after transportation seized up and hundreds of thousands of businesses shut down to slow the spread of the coronavirus.
Business conditions in the United Arab Emirates worsened at a record pace and dropped at the fastest in over a decade in Saudi Arabia after emergency steps were taken. Egypt’s non-oil private sector recorded its deepest contraction in over three years, according to reports released on Sunday.
IHS Markit’s gauge tracking operating conditions in Saudi Arabia’s non-oil private sector dropped below the threshold of 50 that separates growth from contraction for the first time since the survey began in August 2009, to 42.4. Its U.A.E. Purchasing Managers’ Index fell to 45.2, the lowest ever. Egypt’s PMI slipped to 44.2 from 47.1 in February, retreating for an eighth month.
The non-oil economies of the energy-rich Gulf states are likely going in reverse this year, shrinking in the case of Saudi Arabia for the first time in more than three decades, after the one-two punch of collapsing crude prices and the health emergency.
Other highlights from the reports:
• In the UAE, the new orders sub-component fell at the fastest pace on record “to indicate a substantial drop in new business at UAE non-oil companies,” according to IHS Markit
• UAE firms lowered employment for a third month, with the latest decrease the sharpest ever
• Egyptian export volumes dropped at the quickest pace in over seven years and employment in the non-oil sector fell for the fifth month
• New business volumes and export sales by Saudi firms slumped at survey-record paces
• Staffing numbers in Saudi Arabia “dropped only slightly in March, which contrasted with the steep falls in output, new work and business confidence”
Although the reports already laid bare the extent of economic damage in the Middle East, IHS Markit said its survey data for Saudi Arabia and Egypt were collected March 12-23. The pandemic has shown little sign of easing since.
Saudi Arabia, the U.A.E. and Egypt have reported nearly 5,000 virus cases, with over 100 deaths in total. Businesses and travel across the region are in lockdown.
The Gulf’s commercial hub, Dubai, imposed further restrictions on the movement of people and halted metro services. A program to clean the streets will be extended to 24 hours for two weeks from Saturday, while supermarkets, pharmacies and food delivery services will continue operating.
Egypt’s government has curbed economic growth projections for the current and upcoming fiscal year to reflect the potential impact of the virus.
Egyptian authorities have introduced a host of measures, including debt deferral for businesses and individuals, while the central bank last month cut the benchmark rate by 300 basis points. The hope is that the emergency response will help stave off further pain for Egypt’s economy, which had been on course for revival as a result of an International Monetary Fund-backed economic program launched in 2016.
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