The Impact of Corona on GCC and The Global Economy

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CORONAVIRUS IMPACT

The GCC economy depends heavily on revenues from the sale of oil and its derivatives on the world market. Complicating the situation, the GCC countries have relied on the source of oil since it was discovered in the region around 1936, to feed the GDP unilaterally. This phenomenon is a serious breakthrough and may have sounded the alarm repeatedly in previous times, as its economy is highly vulnerable to external risks, which is draining more of its potential and potential, which makes it constantly exposed. The CEO of EXCPR CO.  – Eng. Nayef A. Bastaki said that the panic and fear that befell the financial and economic markets was clearly reflected during the current week – March 8th 2020- in the movement of oil prices in the world markets in addition to the global financial markets- It is the mirror reflecting the efficiency of the economy. Therefore, the company publish this article as a window to highlight what is happening in the economy and capital markets of the countries of the world and its impact on the economy of the region on the one hand, in addition to being reliable to be a practical step to build the road map for building the future. Some of the most notable results were:

OIL PRICE

As is well known, energy source trading prices – oil – are subject to the volatility of supply and demand in the markets as well as the economic movement that is taking place in the world markets in particular. In this regard, the results of research conducted by EXCPR CO. indicate that the oil price curve over the last three decades – 30 years – has experienced three major pitfalls. The point of these bumps is that oil prices have fallen towards an abnormal decline in those three stations, in which the value of the decline exceeded the 50% barrier from the previous value, which necessitated reflection in these cases, in order to exceed the current and future stage. The first was in 1985, the second in 2008 during the global financial crisis, and the third was in 2014 – the mortgage crisis. The fourth and final stop of these fluctuations is what we are currently witnessing thanks to the spread of the Coronavirus around the world, thanks to which the price of a barrel has fallen. The price of a barrel of oil fell by 50.2% in just three months from USD 60.1 per barrel to USD 29.9. The follow-up to the recent movement of oil fluctuations in the world markets will indicate the speed of volatility and volatility in this sector, which requires the GCC countries to pay attention very carefully to the shift towards diversification of sources of income in a serious and immediate manner. The following illustration shows changes in oil prices over previous years. 

GOLD

Despite the rapid doubling of the precious metals and gold sector in particular during the previous period, which has doubled once in almost every seven years, it has not been able to overcome the bumps of low oil prices on the world markets. The results indicate that the price of gold metal is close to USD 1,680 per ounce – a growth rate since the beginning of the coronavirus crisis by 10.1%. We will probably see new records, such as at the end of 2011 of USD 1,830 per ounce. 

S & P 500 INDEX 

At the same time, the US stocks market is not the safest location to be achieved during any financial crisis, although it can be consider with one of the best investment with some risks. EXCPR CO. results show that during 2008 crisis, the drop of the market index is become 42.5%. At the same time, the US market could pass other global crisis in 1985 and 2014. 

SHANGHAI INDEX

The Shanghai stock exchange index has remained consistent about the economic revolution, which has not been the decline exceeds the rate of only 1.1% since the onset of the Corona virus crisis. The Chinese market, like other global financial markets, also declined in 2008, but made many gains in the period of low oil prices in 2014. 

GCC MARKETS

On the other hand, the financial markets in the GCC have not been able to compliment the fear and panic of investors, whether governments, institutions, or even small investors. Since the beginning of the Corona virus crisis at the Jan. 2020, the overall Gulf Index has fallen by 19.7%. The following table shows the impact of the current economic crisis on gulf capital markets as a whole:

  GCC MARKETS DROP RATE SINCE CORONA EST. -%
1 Muscat Securities Market -4.5%
2 Bahrain Boursa  -6.1%
3 Abu Dhabi Securities Exchange -ADX -20.3%
4 Dubai Financial Market – DFM -21.9%
5 Qatar Stock Exchange -26.6%
6 Saudi Stock Exchange – Tadawul -26.8%
7 Boursa Kuwait -31.3%

As discussed in this report, the impact of low oil prices on the global economy has a mixed impact on business sectors and resources. The following table explains the summary of the results achieved:

CHANGE  1985 2008- Financial crisis  2014- REAL ESTATE BUBBLE  2020 -CORONA – TTD
Oil price -62.3% -51.1% -53.1% -50.2%
Gold price 0.6% -8.1% -7.8% 10.4%
S & P 500- 32.8% -42.5% 10.4% 0.6%
DAX -37.5% 25.2% -16.9%
SHANGHAI S. E -31.7% 84.3% -1.1%
GCC markets  -19.7%
US treasury  -36.2% -20.6% -29.6% -66.7%
EURO/ USD 28.6% -17.7% -22.5% 3.6%

In conclusion, Bastaki said that we have to realize that the rate of a global crisis hitting the oil and energy markets is 7-8 years, which requires local and Gulf decision makers to direct all the different sources and possibilities to face them in the future. Diversification of sources of income and the search for production resources away from oil and its derivatives have become an imperative that is not complementary to their survival. General indicators indicate that the overall impact of Corona on the global economy will continue for another 3-6 months, before its negative effects on the markets dry up.

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