COVID-19 pandemic outbreak is now the main threat to the world severely impacting all countries, including those in the Gulf Cooperation Council (GCC) alliance. Despite having more stable and more substantial economic than many other counties in the Arab world, GCC countries are now facing a dual strike following the recent drop in oil prices. The necessary preventive measures for a pandemic are having significant consequences for GCC states most dependent on imports. Even though GCC countries are implementing assertive actions to the spread of the epidemic, the economy of the whole region relying on oil export and tourism will be negatively impacted.
In response to the crisis of the world pandemic, the government of GCC provided supportive measures for businesses to ease the impact on the economy. However, “the camel in the room remains oil,” as Saidi states in his article about coronavirus update in the Arabic world (Saidi, 2020). The oil-price war between Russia and Saudi Arabia has resulted in a significant price per barrel drop affecting economies worldwide. Since the start of 2020, the oil price lowered to 50%, which, together with the effects of the pandemic will cause budget deficits of 10-12% of GDP in all GCC countries (Saidi, 2020). It severely shattered the market, which in the conditions of the ongoing coronavirus crisis created negative economic consequences. According to Liangxiang (2020), in some of the GCC countries’ dependence on oil revenue is as high as 70%. Thus, oil-producing countries, despite attempts to make a shift in their economies for the past years, are mainly dependent on oil imports. It will lead to losing half of their revenue and influence global manufacturing and transportation on a large scale.
Even though the members of GCC’s healthcare systems are more efficient than the rest of the world, the economic disruptions followed by the fall of oil prices can cut the financing of other public sectors. During the past decades, GCC countries have attracted millions of migrant workers, both laborers, and middle-class people. Most of their families rely on salaries and financial support from the jobs in the region (Liangxiang, 2020). These expatriate workers may complicate the GCC’s efforts to fight the pandemic since they increase the number of people vulnerable to the virus, thus growing the cost of treating the infected. Moreover, the affected economy may lead to significant financial losses and create the need for repatriation to the home countries of those workers. Since the laborers usually live in crowded conditions, they are the most susceptible population to the virus, which might create a faster spread of COVID-19 and social discontent.
The necessary measurements and restrictions to minimize the spread of COVID-19 have a severe influence on the development of the second largest sector of the economy – tourism. All counties have suspended inbound flight operations, or, like Oman, refused the visa issuance for immigrants. Also, Saudi Arabia postponed the mass services in mosques as well as banned the Umrah pilgrimage performed by around two million Muslims each year (Ebrahim & Memish, 2020). The COVID-19 pandemic has put under question such a significant event as Expo 2020 in UAE, which is expected to attract 25 million tourists (Amirah-Fernández, 2020). Since Dubai is considered one of the best shopping points in the world, it will be impacted by the fall of the retail industry due to the lack of international customers. Overall the hospitality industry is experiencing the coronavirus crash due to the lockdown and absence of tourists who provided significant income to the state.
There is, however, a silver lining to the whole situation of failing business activity. The demand for medical supplies such as facemasks and sanitizers can be profitable for manufacturers and retailers. Due to high demand, they are increasing prices before the government law of pricing has taken place. Since the end of the outbreak is yet to be seen, the hard infrastructure of the healthcare will have more investment in an attempt to find a vaccine or due to the necessity of antibiotics. The delivery companies and e-commerce will also grow because most of the customers stay at home. Another sector that could get increased interest in sustainable energy providers (Elbadawi & Makdisi, 2020). Due to the lowering of oil prices and economic challenges, GCC countries could guide their efforts towards more sustainable energy sources, which could become another area for expanding businesses.
Beyond the apparent pandemic crisis, GCC countries faced a dual challenge with the drop in oil prices. It has shown the consequences of over-reliance on the export of energy, considered the most significant profit is now a structural weakness in the economy of the region. Clearly, the ways in which GCC countries will manage the economic and health crises will determine the future of the area, and perhaps the whole world. Since both the largest sources of income, tourism, and oil supply, are now at risk, GCC countries should think about the alternatives to rehabilitate the economics.
References
Ebrahim, S. H., & Memish, Z. A. (2020). Saudi Arabias measures to curb the COVID-19 outbreak: Temporary suspension of the Umrah pilgrimage. Journal of Travel Medicine. Web.
Elbadawi, I. A., & Makdisi, S. (2020). The sustainability of GCC development under the new global oil order. The Economic Research Forum. Web.
Liangxiang, J. (2020). The pandemic, falling oil prices and implications in the Middle East – China.org.cn. China.org.cn. Web.
Saidi, N. (2020). The Arab world’s perfect COVID-19 storm. Project Syndicate. Web.