Middle East faces a double whammy

24 March 2020
The region, and the world, is focused on getting through a public health crisis with as much as possible left intact

The announcement by Emirates Airline on 22 March that it was to suspend most of its passenger flights for three months from 25 March, and put all of its 100,000 plus staff on significantly reduced wages, was a shock. But it was not a surprise. 

With the world economy effectively being closed down as governments seek to slow the spread of Covid-19, the commercial challenge facing every business is how to get through the crisis intact. And the biggest unknown is, how long will it last? It is a question that no one can answer with any degree of certainty. 

This is an existential crisis for many companies. With the international travel industry in quarantine, to borrow a phrase used by Emirates chairman Sheikh Ahmed al-Maktoum, the actions taken by Emirates while shocking, are correct. 

In some markets, notably the UK and US, political leaders have delayed tight social restrictions because of concerns about the economic consequences of lockdown.

We can now see from the horrors unfolding in Italy and Iran that this is a mistake. 

Current lockdown policies are about preventing a complete breakdown of public health services. These are being accompanied by huge monetary easing and fiscal stimulus measures to prevent the health crisis leading to economic collapse.

Once we are through the crisis, we will see a new round of austerity programmes 

The Middle East, however, is facing a double whammy due to the collapse in oil prices. This is adding new pressure to already strained budgets and, once we are through the crisis, we will see a new round of austerity programmes.

When that time comes, it will be an opportunity for governments to kick start much-needed fiscal and structural reforms. In the meantime, the focus will be on getting through the Covid-19 crisis.


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