Coronavirus recovery: Saudi Arabia, UAE, Egypt business conditions decline slows

The skyline of Riyadh, Saudi Arabia. (File photo: AFP)

Business conditions in Saudi Arabia, the UAE, and Egypt declined in May at a slower pace than in April, suggesting the worst of the coronavirus downturn may be over, according to data from IHS Markit.

The coronavirus pandemic prompted governments to implement strict lockdown measures to combat the spread of the virus, keeping consumers at home and businesses shut. While economists have warned that the virus will likely cause the worst global recession in nearly a century, this IHS survey suggests that the worst impact may already be over in three of the Middle East’s most important economies.

“Business conditions in Saudi Arabia deteriorated again during May, but the speed of the downturn moderated from April’s survey-record pace … Some firms noted that an easing of lockdown measures had helped mitigate the downturn in May, alongside efforts to boost online business operations,” said Tim Moore, economics director at IHS Markit in a research note.

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Moore’s statement drew upon data from the HIS Markit’s Purchasing Manager’s Index survey, which the company uses to gauge how the non-oil private sector is performing in each country. A figure of below 50 indicates that the sector contracted, while above 50 indicates expansion.

Saudi Arabia’s May PMI was 48.1, a significant rise from April’s record low 44.4, but still contracting as it falls under 50. Slower declines in output, new work and employment caused the increase, IHS Markit said.

However, Moore noted that the economic impact of the coronavirus crisis was not over for the Kingdom. “There were still widespread reports that business closures and constrained operating capacity had held back overall activity across the non-oil private sector,” he said.

Meanwhile, the UAE’s PMI rose to 46.7 in May from 44.1 in April, but sentiment towards future output dipped to the joint-lowest on record as businesses voiced concern about the long-term impact of the coronavirus on the economy.

“Lockdown measures worldwide have notably reduced exports, as well as limiting input supply. However, May data suggested that these impacts are lessening as some countries move to lighter measures. Export sales in the UAE fell again, but at a softer rate, while deliveries were helped by the lifting of travel restrictions,” said David Owen, an economist at IHS Markit.

Egypt’s PMI rose from a record low of 29.7 in April to 40.7 in May, but still indicating a fall in business conditions, the country’s 10th month in a row of falling conditions, and also the second worst recording after April on record.

“The remaining solace for Egyptian firms is that overall cost burdens eased for the first time in the series history, as wage cuts coupled with only a marginal rise in purchase prices in May. This could be important as firms look to maintain low output prices for when the economy recovers, with the market environment likely to be challenging,” Owen said.

“Sentiment was still positive, though concerns arose that the US/China relationship is worsening, which could affect any rebound in global demand,” he added.

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Last Update: Wednesday, 03 June 2020 KSA 14:55 - GMT 11:55
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