Muslim pilgrims put on masks on the Grand Mosque in Saudi Arabia’s holy metropolis of Mecca on February 28, 2020. Saudi Arabia suspended visas for visits to Islam’s holiest websites for the “umrah” pilgrimage, an unprecedented transfer triggered by coronavirus fears that raises questions over the annual hajj.
ABDEL GHANI BASHIR | AFP | Getty Pictures
Oil costs, tourism and capital markets hit by the coronavirus can have an effect on Gulf economies, an analyst informed CNBC this week.
“For the GCC economies, we have recognized three channels of transmission of the COVID-19,” Mohamed Damak of S&P World Scores stated, referring to the novel coronavirus that was first detected in China final 12 months. He spoke to CNBC’s “Capital Connection” on Thursday.
The World Well being Group on Wednesday declared the virus a world pandemic after it unfold to greater than 110 nations and contaminated not less than 121,000 individuals.
Iran, the worst hit Center Jap nation, reportedly has round 9,000 confirmed circumstances and over 350 deaths, in keeping with the Related Press. International locations corresponding to Saudi Arabia, Bahrain, the UAE and Oman even have a number of circumstances of an infection.
Listed here are 3 ways Gulf economies might be impacted by the virus:
Oil is among the “principal” export merchandise of Gulf Cooperation Council nations, and costs have fallen dramatically this week after OPEC and its allies failed to succeed in an settlement to chop output.
Crude futures plunged greater than 20% Monday after Saudi Arabia stated it might increase manufacturing and provides reductions on its oil. On Thursday afternoon in Asia, Brent crude was down 6.01% at $33.64 a barrel, whereas U.S. crude traded at $31.15 a barrel, down 5.55%.
That’s more likely to be problematic for nations within the area, a lot of which rely closely on oil revenues.
Damak added that S&P World Scores revised its worth forecast from $60 a barrel to $40 a barrel for the 12 months. That determine is under the fiscal breakeven oil costs for all Center East and North Africa oil producers, in keeping with IMF knowledge.
“And when you have a look at the geographic distribution of exports, you’ll be able to see for instance that for Oman, greater than 53% of exports go to nations the place we see circumstances of COVID-19 both excessive or spiking,” he stated.
Journey and actual property
Spending by foreigners can also be more likely to take successful due to the coronavirus, significantly in Saudi Arabia and the UAE.
The UAE attracts greater than 17 million guests yearly, Damak stated, and this 12 months it hopes to draw 25 million vacationers to Expo 2020 Dubai in October.
Saudi Arabia receives 20 million vacationers yearly, most of them for spiritual functions. The dominion has quickly suspended entry to the nation for the aim of Umrah and visiting the Prophet’s Mosque, an essential website for Muslims.
Damak stated, at this stage, it is troublesome to inform if Expo 2020 and the pilgrimage season — which begins in July — will probably be affected by the virus outbreak.
“If that had been to be the case, then clearly the financial impression on each Saudi Arabia and the UAE could be increased than what we at present anticipate,” he stated.
On the true property facet, he identified that Chinese language patrons alone contributed to 1% of actual property transactions in Dubai in 2018. However buying selections could also be postpone because of the “psychological impact” of the coronavirus regardless of falling rates of interest, he stated.
There was “excessive volatility” in capital markets just lately, and that will imply firms with “weak credit score tales” can have bother coming to the market, stated Damak.
“Which means that Bahrain, Oman and possibly additionally some corporates within the UAE will most likely discover it a bit bit tougher to get to the market this 12 months.”