In a recent circular, the bank revised its global growth to 3% (lowered from 3.3%) to be its weakest since the global financial crisis, with Brent crude prices to average at US$ 64/bbl versus the previous predictions of US$ 70/bbl.
According to the circular, the GCC is exposed to the slowdown in global growth – and China's growth in particular – via two main channels: softer oil demand growth (with lower prices underpinning the need for ongoing production cuts by OPEC producers) and weaker trade and tourism.
“We lower our GDP forecasts for all the economies of Bahrain, Oman, Saudi Arabia and the UAE and assess implications for their twin balances,” Standard Chartered economists Bilal Khan and Carla Slim explain. “Saudi Arabia sees a downward growth revision on expectations that the Kingdom will continue to shoulder the bulk of OPEC output curbs; while Oman is directly exposed given that China is its largest oil export destination.”
“In the UAE, the non-hydrocarbon sector is particularly vulnerable to weaker global growth given its position as a trade and transport hub. This is especially relevant, given Dubai’s hosting of EXPO 2020 in Q4, with China a top market for inward tourists,” they add.
While governments across the GCC continue to grapple with the weakened economic forecast, business leaders are also looking to take key actions to mitigate the effects and to ensure their organizations are in good shape to withstand what is ahead.
Aviation is just one example of an industry where businesses are forced to take immediate action to lessen the impact of the crisis. Owing to the severity of travel restrictions and the expected global recession, the International Air Transport Association (IATA) updated its analysis of the revenue impact of the COVID-19 pandemic on the global air transport industry with estimates that industry passenger revenues could plummet $252 billion or 44% below 2019’s figure.
“The airline industry faces its gravest crisis,” said the IATA’s Director General and CEO, Alexandre de Juniac, in a recent statement. “Without immediate government relief measures, there will not be an industry left standing. Airlines need US$ 200 billion in liquidity support simply to make it through. Some governments have already stepped forward, but many more need to follow suit.”
Today, organizations are forced to adopt a systematic approach to strengthening the resilience of their current business models in order to safeguard business continuity during the coronavirus pandemic, according to Gartner, Inc.
Gartner proposes a five-phase strategic approach beginning by defining their current business models as a foundation for making key modifications and moving on to identifying uncertainties by carrying out a strength, weakness, opportunity and threat (SWOT) analysis, or by brainstorming.
The third phase involves assembling a project team to assess, or even quantify, the impact of the identified uncertainties. The next stage in the process involves developing tentative strategies rather than estimate their feasibility. In the final phase, leadership teams should decide on which changes to execute.
Similarly, Bain’s Middle East Managing Partner, Tom De Waele highlights that, as the COVID-19 outbreak has upended businesses around the world at an alarming speed, one thing has become clear to executives grappling with the crisis: “doing nothing is not an option”.
“It is obvious that the COVID-19 outbreak is unlike any previous crisis. Hence, CEOs need a unique, tailored and immediate crisis-response,” De Waele explains. “A wait-and-see approach has no chance of being effective. CEOs should be aware of the situation, up to speed with the latest updates and accordingly implement a carefully mapped out action plan."