World Bank Warns Against Slow Implementation of Virus Containment Strategies
The World Bank warned against the difficulty in holding back the coronavirus pandemic and a slowdown in implementing containment strategy for the global economy.
It stressed the need for Gulf governments to accelerate the pace of reforms, in order to achieve a green and diversified economy, largely dependent on digital technology, and increase the proportion of women participating in economic activities.
World Bank’s Country Director of the GCC Countries Issam Abousleiman told Asharq Al-Awsat that the pandemic has upped the competition and reduced the number of regional markets.
COVID-19, according to Abousleiman, also reinforced the risks faced by global supply chains posed by high costs and lack of innovation.
He reaffirmed that it was hard to create a balance among less risk supply chains and sufficient competition and innovation.
Abousleiman pointed out that the low levels of public debt for some Gulf countries would be beneficial in absorbing the rapid growth in public debt seen around the world.
The banking sector in Gulf countries enjoys a great flow of liquidity and strong capital, Abousleiman said, but pointed out that in time decision-makers will have to face the issue of bailing-out companies.
“Bankruptcy will be the inevitable outcome of the process of moving capital between deteriorating and expanding sectors,” he said, stressing the importance of enabling the emerging sectors.
According to Abousleiman, the World Bank called for initiatives with Gulf Cooperation Council member states to support and facilitate international trade during this pandemic, including the suspension of customs duties on basic medical and food supplies.
It also called for adopting special measures to facilitate safe cross-border trade and support better use of risk management.
When asked about how the coronavirus pandemic affected GCC economies, Abousleiman quoted World Bank estimates which predict an average loss of 6 percentage points of GDP based on 2019 levels. This is equivalent to $ 103 billion.
“We assume that the major event that caused the change in our expectations over the past months is the pandemic,” Abousleiman told Asharq Al-Awsat, adding that the pandemic affected the global demand for energy, which in turn affected GCC countries given that they are a primary producer of oil and gas.
“Observations spot particularly large impacts on UAE and Oman, due to the non-hydrocarbon sectors' reliance on tourism and trade, while Kuwait has a significant drop in crude oil production, but the shortage in other sectors contributes to the recession,” Abousleiman said.
On recommendations and advice offered by the World Bank to GCC economies to face the coronavirus pandemic, Abousleiman said: “As the coronavirus pandemic crisis persists, it is too early to know all the elements of the economic situation.”
“At this stage, it can be said that the countries of the Gulf Cooperation Council have benefited from the low levels of public debt in general, "with the exception of Oman and Bahrain", which allows absorbing the rapid growth in public debt that we see in different parts of the world,” he added.
Abousleiman also revealed that the strong liquidity and capital in the GCC banking sectors help through the turbulences faced by the private sector.