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TEI - Energy Outlook

Covid-19 Impact in MENA Region

The Middle East and North Africa (Mena) is hit hard as the ongoing Covid-19 pandemic continues to disrupt daily life with the total number of confirmed coronavirus cases reaching 48,732 as of 31 March.

Iran, the worst-hit in the Mena region, accounts for 85.5% of Covid-19 cases while the six GCC states make up 7.5% of the region’s total confirmed cases as on 29 March, according to data from the World Health Organization (WHO).

The UN Secretary General António Guterres says Covid-19 could bring a recession "that probably has no parallel in the recent past". The World Bank warned that "significant economic pain" seemed "unavoidable in all countries".

International oil slumped to a 17-year low as coronavirus lockdowns hit major economies. Besides reduced demand because of the Covid-19 pandemic, an oil price war between Saudi Arabia and Russia has contributed to the plunge in crude price. It has declined by about 66% from $60 a barrel on 18 February 2020 to $20 on 31 March. The price plunge has dealt a severe blow to oil-dependent economies, said Fatih Birol, the executive director of the International Energy Agency.

The outbreak is expected to create a number of key challenges for the region’s projects market in 2020 and could jeopardize $91bn of project spending, according to ME Information Services, MEED.

GCC governments have taken several initiatives and launched stimulus packages to support the economy from the impact of the Covid-19 pandemic.

In the G20 virtual meeting, more than $5 trillion has been committed to support the global economy as part of efforts to contend with Covid-19’s impact on daily life and businesses. The summit, which was chaired by Saudi Arabia’s King Salman bin Abdulaziz al-Saud, also allocated a budget for research into slowing down the spread of the new coronavirus.

Saudi Arabia has committed $13bn to help SMEs, e-commerce companies and entities affected by closures in Mecca and Medina. Another $19bn of financial support is made available as Riyadh reviews and reallocates government spending for 2020.

Sheikh Hamdan bin Mohammed bin Rashid al-Maktoum, Crown Prince of Dubai and chairman of the Executive Council of Dubai, announced a $409mn stimulus package for the emirate. The three-month package features initiatives for the retail, trade, tourism and energy sectors. Additionally, Central Bank pledges $27.2bn to economic growth and Abu Dhabi introduces $1.36bn stimulus package.

Manama has launched the $11.4bn economic stimulus package, while Doha has committed $20.6bn to private sector incentives. Central bank of Oman has launched $20 billion incentive package for financial institutions to combat the impact of Covid-19 on the local economy.

Iran has requested $5bn in emergency funding from the International Monetary Fund for the first time since 1962.

The Covid-19 outbreak is expected to have a severe impact on global business for months to come. The gulf economies are likely to face a setback through weaker hydrocarbon demand and prices, tourism, trade and logistics hit by the pandemic.

Pallavi Agrawal