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Economic Implications of COVID-19
9 April 2020
Close
Focus on Saudi Arabia
2
Table of contents
Global economic
impact of COVID-19
Global economic
outlook projections
Efforts of Saudi
Arabia to combat
COVID-19
Global spread and
confirmed cases
Economic impact of
protective measures
to contain COVID-19
2 4
3 51
3
Global economic impact of COVID-19
4
1 Global economic impact of COVID-19The COVID-19 pandemic has heightened economic and socio-economic uncertainty.
According to the International Monetary Fund (IMF), uncertainty around the pandemic
is highest in advanced and emerging market economies and, while rising, remains at
low levels in low-income economies.
Many countries have adopted different degrees of lockdown or social isolating policy
to mitigate the spread of the virus.
These lockdown policies are having a severe economic impact; the longer these
policies last the stronger the negative repercussions on measurements such as GDP
and employment will be, and the longer the recovery period.
Many international organizations and institutions are expecting the COVID-19
pandemic to plunge the world in 2020 into the worst economic recession since the
global financial crisis in 2008.
5
Global spread and confirmed cases
6
2.1
Source: Worldometers
Figure 1: Selected countries total cases
2,605
30,217
51,608 60,500
81,708
98,010 102,024
132,547 135,032
360,901
-
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000 Total cases Total deaths Total recovered
Country
World
wide
Deaths as % of
the total cases1.5% 2.1% 10.4% 6.2% 4.1% 9.1% 1.7% 12.5% 9.8% 3.0% 5.6%
Recovery as %
of the total cases21.2% 4.4% 0.3% 40.1% 94.3% 17.6% 28.1% 17.2% 29.9% 5.3% 20.8%
Saudi Arabia Turkey UK Iran China France Germany Italy Spain USA
Saudi Arabia:
Total cases: 2,605
Total deaths: 38
Total recovery: 551
By the 6th of April
2020, the global
number of confirmed
cases reached
1,335,570 cases.
7
Figure 2: Countries confirmed cases as a percentage of the global cases
Source: Worldometers
Saudi Arabia Turkey UK Iran
China France Germany
Italy Spain USA
0.2% 2.3% 3.9% 4.5%
6.1% 7.3% 7.6%
9.9% 10.1% 27.0%
Developed
countries have
been most hit by
the coronavirus,
with confirmed
cases in the
USA, Spain and
Italy representing
27%, 10.1% and
9.9%,
respectively, of
the total. Chart
compares
developed
countries with
hard-hit emerging
economies.
2.2
8
Global economic outlook projections
9
3.1
Source: EIU,IMF
2020 Growth projections amid COVID19
World
-2.2%
1.0%
-2.8%
-5.0%
-5.5%
-6.8%
-7.0%
China
France
Germany
Italy
USA
Brazil
2.1%India
Global economy has
entered a recession
due to COVID-19.
Although initial
predictions in January
showed growth of
3.3%, the global
economy will likely
contract by 2.2% in
2020.
10
Chetan AhyaChief Economist at
Morgan Stanley
Brian CoultonChief Economist at
Fitch Ratings
Kristalina GeorgievaChairwoman at
International Monetary
Fund
David MalpassPresident of the World
Bank Group
“While some downside
protection from the
policy response can be
expected, the
underlying damage
from tighter financial
conditions and from
COVID-19’s impact will
be a material drag for
the economy“
“Deep Global
Recession in 2020
as Coronavirus
escalates”
“It is now clear that we
have entered a
recession, as bad or
worse than 2009”
“As we know, beyond
the health impacts from
the COVID-19
pandemic, we are
expecting a major
global recession”
Many international
organizations and
financial institutions
are expecting the
coronavirus
pandemic to plunge
the world into a
deep recession in
2020.
3.2
11
Economic impact of protective measures to
contain COVID-19Initiatives and actions from selected countries to combat COVID-19
Direct impact of protective measures and containment policies
Impact on most affected sectors
4.1
4.2
4.3
12
4.1 Epi curve with CDC epidemic ‘intervals’
During the spread of COVID-19, countries are taking drastic measures to
contain the spread of the virus so as to not overwhelm the healthcare system
and facilities. This practice is known as ‘flattening the curve’.
Number
of new
cases
Time
Recognition
& initiation
Acceleration
& PeakDecelerationInvestigation Resolution
While China has
made it to the
resolution phase,
Europe and the
USA are still in
their accelerating
phase. The peak
could be much
higher for
developing
countries that are
currently only at
the beginning of
the curve.
Source: COVID-19 testing for testing times, Richard Baldwin, 26 Mar. 2020
13
Countries with
strict containment
policies aimed at
flatting the curve
of the pandemic
will reduce
pressure on their
healthcare
infrastructure by
delaying the peak.
Capacity of healthcare system
Time since first case
With protective
measures
Co
un
t o
f C
ase
s Without
protective
measures
The direct impact of protective measures to flatten the curve
Isolation of
confirmed
cases
Nationwide
lockdown
School and
university
closures
Complete
suspension
of air travel
Social
distancing
Source: COVID-19 outbreak and impact on the economy, Frost & Sullivan, 17 Mar. 2020
4.1
14
There is a direct
correlation between
flattening the curve
in order to contain
the virus and thus
maintain healthcare
system capabilities,
and economic
growth. Strict
containment policies
have a high direct
economic impact
across the economy,
particularly the
services component.
New
cases
GDP
loss
Containment
policies
Containment
policies
Economic
policy
Time
Legend
New cases without containment policies (high death toll).
New cases with containment policies (fewer deaths)
Medical: Epi curves
Economic: Recession curves
Infographic Inspired by Gourinchas (2020)
Legend
Without containment policies (death toll high, recession
shallow).
With containment policies; without economic rescue
package (death toll low, recession severe and persistent).
With containment policies; with economic rescue.
Package (death toll low, recession minimized).
4.1
Source: COVID-19 testing for testing times, Richard Baldwin, 26 Mar. 2020
15
Impact of protective measures on the supply and demand sides
4.1
Lockdowns Factory closures Loss of confidence
Travel bans and
transportation
restrictions
Movement and
mobility
Cutbacks in service
provisions
Supply chain
disruption
Closure of public
spaces
Purchasing power
Containment measures DemandSupply
Source: KPMG resources, OECD
16
4.2Containment
measures such as
quarantines, travel
restrictions, and
closure of public
places have a
significant
negative economic
impact on certain
sectors.
EnergyOil and gas were among the hardest hit
commodities. With air travel suspended and
assembly plants shutting down production, the
price of crude oil dropped dramatically. This.
along with output disagreements between
Saudi Arabia and Russia, reduced oil prices to
a record setting $23 per barrel on March 30th.
Air travel and tourismWith air travel bans in almost all infected nations
globally, airlines and hotels have suffered a sharp
decline in demand. Decreases in demand for air
travel and tourism has been so severe that airlines
around the world ground all their commercial
fleets, and some have resorted to laying-off
employees.
Entertainment/ leisureAs a result of containment measures, the
entertainment and hospitality sectors are
being severely impacted, especially
cinemas, restaurants and the events
industry.
ManufacturingManufacturing is suffering from both
declines in output via virus response
measures and supply chain disruptions
(supply shock), as well as falls in
confidence (demand shock).
Energy, capital assets, and non-essential retail and commerce
Negatively impacted sectors
17
Social distancing
policies have led
to a noteworthy
shift in consumer
behavior, most
notably spiking
online services.
Medical suppliesThe healthcare sector has experienced a mixed
response to the COVID-19 outbreak. As a
consequence of hoarding behavior from the
public, increased demand from the health
sector, and supply chain disruptions, there have
been shortages of medical items such as face
masks and hand sanitizer.
E-commerceAs e-ecommerce platforms are readily and
widely available among consumers, e-
commerce websites, along with consumables,
are performing far better than any other sector.
Social distancing and staying indoors are
intensifying demand for deliveries through such
platforms.
E-learning To avoid any disruptions of the academic
system, countries have made the shift to using
online classrooms and e-learning tools.
ConsumablesSupermarkets are among the best performing
businesses since the COVID-19 outbreak;
quarantine and social distancing has led to a
surge in product turnover of such businesses.
Non-durable goods, healthcare, and E-commerce
4.2Non-durable goods, medical supplies, and e-commerce
18
4.3 Responses of selected countries to combat COVID-19China
Key containment measures
The Chinese government had forced a 14-days
quarantine on returning migrant workers to
prevent further transmissions of the disease.
The Chinese government has built extra hospitals
and health clinics to contain infected individuals
and treat them.
Key policy measure cuts by 50-100 bps for
banks to support small firms.
Increased production of medical equipment.
Delay of loan payments to support households
and SMEs.
Key economic measures
Source: IMF
19
4.3Spain
Source: IMF
Key containment measures
Key economic measures
Suspension of commercial, hotel,
restaurant, and recreational
services. Only essential services
are allowed until April 11.
Financing basic social services
provision for residents.
Suspension of price review to
avoid any increase in household
expenses.
Research & development funding
for the COVID-19 vaccine.
Responses of selected countries to combat COVID-19
20
4.3United States of America:
Source: IMF
Responses of selected countries to combat COVID-19
The US government restricted travel between states
within the USA, to reduce the spread of COVID19.
Closure of schools and social distancing measures
are in place.
Increased testing
Key containment measures
Key economic measures
Reduced key policy interest rate to 0%.
Student loans obligations have been suspended for 60
days and tax filing deadlines have been extended.
The US government has provided billions of dollars in
funds for hospitals to develop and test new vaccine for
the virus.
21
4.3
The UK government has
enforced remote working to
protect UK workers and
mitigate the negative impact of
COVID19.
Closure of entertainment and
other non-essential facilities.
United Kingdom
Source: IMF
Responses of selected countries to combat COVID-19
Key containment measures
Key economic measures
The UK government has expanded
the social safety net.
Grants are available for firms in the
most affected sectors.
22
4.3
Travel restrictions and ban on large gatherings.
Temperature screening and social distancing.
Closure of entertainment venues.
Singapore
Source: IMF
Responses of selected countries to combat COVID-19
Containment measures
Key economic measures
Easing of financial obligations to support SMEs
survive the crisis.
Wage subsidies to support businesses under The
stabilization and support package
Reduced property taxes and other government
related fees in tourism and entertainment sectors.
23
Efforts of Saudi Arabia to combat
COVID-19 The impact of COVID-19 on oil prices
Total confirmed cases per day
Cumulative total active cases compared to other countries
5.1
5.2
5.3
Government efforts to mitigate the negative economic and socio-economic impact
5.4
24
5.1Saudi Arabia has
implemented
containment and
preventive
measures to
protect citizens
and residents from
the health
implications of
COVID-19.
Saudi Arabia: Case in point
1 2 5 7 11 15 20 21 45 86 103 118 133 171
238 274 344
392
510 562
767
900
1,012 1,104
1,203 1,299
1,453
1,563
1,720
1,885
2,039
2,221
2,402
2,605
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 2 3 3 4 8 8 10 16 21 25 29 34
38
0 0 0 0 0 0 0 0 1 1 2 3 6 6 8 8 8 24 24 24 28 29 33 35 37 66115
165264
328 351420
488
551
-
500
1,000
1,500
2,000
2,500
3,000
Total cases Total deaths Total recovery
Source: MoH dashboard
25
5.2Cumulative total
active cases
compared to
other countries.
Source: Worldometers
With current active cases representing only 0.6 percent of the total active
cases in the world, Saudi Arabia's rate of new cases is following a slower
trajectory than its peers.
1 1 2 5 5 7 11 15 20 21 44 85 101 115 127 165 230
266 336 368
486 538
738
869
976
1,066
1,162
1,225
1,330
1,388
1,440
1,536 1,663
1,772
1,921
-
50,000
100,000
150,000
200,000
250,000
300,000
350,000
Saudi Arabia USA China Italy UK Turkey Singapore
26
5.3The Impact of
COVID-19 on oil
prices
Source: investing.com
The economic
impact of COVID-19
and the plunge in oil
prices has affected
the position of the
government
finances of Saudi
Arabia.
— Oil prices had started to declined from Jan. 2nd, reaching $53.27 per barrel on Feb. 10th. This decrease was
largely due to lower demand in response to the lockdown in China following the outbreak of COVID-19.
— Between Mar. 11th and 31st, the price per barrel dropped from $37.22 to $22.74. Aside from the spread of
COVID-19, this was the result of a failed OPEC+ agreement and an ensuing oil price dispute between Saudi
Arabia and Russia, with both countries ramping up production. On Mar. 11th, Saudi Aramco announced that it
will produce 12.3 million barrels per day (bpd), instead of 10 million, as of Apr. 1st.
— On Apr. 3rd, the oil price increased to $32.68 per barrel following the announcement by US president Donald
Trump that OPEC and its allies will meet on Apr. 6th to discuss oil production.
▪ The impact of COVID-19 spread
in china
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PR
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AR
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L I
N $
BRENT CRUDE OIL PRICE
▪ Impact of COVID-19 globally
▪ The oil price war between
Saudi Arabia and Russia
starts
▪ After the announcement
of a potential OPEC+
meeting
27
Major Healthcare initiatives by the government of Saudi Arabia5.4.1
On 13 March, the MoH
announced that every traveler
coming into Saudi Arabia from
that day must remain in domestic
quarantine, and will be granted
sick leave equivalent to the
duration of their quarantine.
The MoH issued an educational
guide in several languages that
targets citizens and residents to
raise awareness about the risks of
COVID-19. In collaboration with
CITC, MoH has relayed two billion
awareness messages through
SMS.
The Ministry of Health (MoH)
is providing protection and
healthcare for every citizen
and resident to support the
country initiatives to combat
COVID-19. Many
procedures e.g. temporary
facilities for returning
citizens, have been
implemented by MoH in
coordination with different
institutions to mitigate the
negative impact over the
health system.
On 12 March, the MoH
developed the Salem tool as
a measurement tool for
assessing health risks.
Another tool, Mawid, helps
people to evaluate their
situation in a self-
assessment service.
The Minister of
Health has
announced the
issuance of a
royal decree
providing free
treatment to all
people withcorona virus.
28
5.4.2Since the outbreak of
COVID-19, Saudi Arabia has
taken the following steps to
promote social distancing as
a means of protection, and to
cut the spreading chain of
the virus. The government
has set restrictions on
peoples movement and
issued guidelines on social
distancing.
King Salman issued an
order imposing a curfew
across Saudi Arabia.
Suspended all domestic
flights, buses, taxis and
trains for a period of 14
days.
Social initiatives to combat the
COVID19:
Closed all schools and other
educational institutions until
further notice.
Suspended all
international flights until
further notice.
Suspended attendance at
work places in all
government agencies.
Closed unnecessary markets and
commercial complexes, except for
pharmacies and food ration
activities.
Restricted residents from
moving between the thirteen
regions of the Kingdom.
Banned gatherings in
public places such as
gardens, beaches,
resorts and camps.
Major Social initiatives to combat the COVID-19
29
5.4.3Major
Economic
initiatives to
combat the
COVID-19 (1/3)
Measures by the Saudi Arabian
Monetary Authority (SAMA) 1/2
SAMA coordinated with the National Center for Disease Prevention and
Control "Weqaya“ to isolate all Saudi currencies received from its
branches from outside the Kingdom, to combat the virus.
On 16 March, SAMA cut
the repo rates by 75 basis
points to preserve
monetary stability given
evolving global
developments. The
authority has also funded
a Private Sector Financing
Support Program with a
total value of about SAR
50 billion.
SAMA announced the suspension of the freezing of
clients' bank accounts for a period of 30 days, according
to specific cases.
On 22 March,
SAMA announced
an initiative
whereby Saudi
local banks
postpone (for 3
months)
installments for all
public and private
health care
personnel who
have credit
facilities, effective
from April.
2
1
4
3
30
5.4.3Major
Economic
initiatives to
combat the
COVID-19 (2/3)
Measures by the Saudi Arabian
Monetary Authority (SAMA) 2/2
SAMA informed the licensed Payment
Services Providers (PSPs) in the Kingdom
that it will raise the allowed top-up of the
monthly ceiling limit for e-wallets up to
SAR 20,000.
SAMA has adopted a new
precautionary package directed
toward banks.
6
5
31
5.4.3 The Minister of Finance and
Acting Minister of Economy and
Planning has stated that the
government has approved a
partial reduction in selected
essentials with the least social
and economic impact by
approximately SAR 50 billion.
The government has
prepared urgent initiatives
costing over SAR 120
billion to support the
private sector and
economic activities most
affected by the virus.
King Salman has
allotted SAR 9 billion to
subsidize up to 60% of
salaries of Saudi
citizens working in the
private sector for three
months.
Enabling
employers to
refund the fees of
issued work visas
that were not
used during the
ban, or extend
them for a period
of three months
without charge.
Exemption from the expat
levy for those whose
Iqama has expired by
extending their Iqama for
a period of three months
without charge.
Enabling employers to
extend exit and re-entry
visas for a period of
three months without
charge, along with
many other procedures. 6
2
34
1
5Measures by
the Ministry of Finance (MoF):
Major
Economic
initiatives to
combat the
COVID-19 (3/3)
32
5Preeminent coordination
within government
entities to mitigate the
consequences of
COVID-19
33
KPMG contact
Dr. Hussain Abusaaq
Chief Economist and Head of Research, Markets
Email: [email protected]
Mobile: +966 55 396 9697
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