Summary: Economies in the MENA region were slowing even before coronavirus hit.
As the coronavirus, Covid-19, continues to impact markets and national and global economies, it is worthwhile noting that MENA economies were already slowing before the virus hit the region.
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As I said in a TV interview I gave yesterday for the Indian business channel ETNow and without wishing to sound unduly callous, from the perspective of investors/financial markets there are similarities between Covid-19 and major terrorist attack, ie it is not the act itself which is the major cause of economic slowdown and market sell-off but the responses of policymakers (and the general public). In trying to forecast, we all, therefore, need to think carefully not just about the science of Covid-19 but also the likely policy responses – which, let’s keep in mind, will be based on no better knowledge and understanding of the virus than investors have and which will often and inevitability be determined by non-scientific factors. Unfortunately, there remains a good deal of uncertainty around both science and policymaking; so there is much work to do sorting out fact from speculation.
As things stand I think markets are (understandably) very headline driven, as is clear from volatility not only in equity markets but also around the price of oil (which has also recently been driven upwards by an expectation that the 5/6 March Opec+ meeting will agree further cuts despite clearly stated Russian reluctance: https://www.aljazeera.com/ajimpact/opec-meeting-russia-cagey-oil-cuts-200302141913065.html). Reacting to headlines is all very well for short-term traders but the rest of us need to give more thought to prospects for a sustained market recovery or not as the case may be.
For example and notably (and putting to one side the brief spike which followed the assassination of Qassem Suleimani), the oil price was already sliding from its start-of-year level before Covid-19 had any impact, underlining that the pandemic’s effect on the global economy cannot be viewed in isolation. Let’s keep in mind that (a) the cycle is old, (b) GDP growth forecasts have in any case been lowered repeatedly over the past 12 months or so, and (c) there is a lot of political risk and uncertainty out there right now quite aside from Covid-19.
This being said, I agree with the general concern that in Europe and the US at least we have some distance to go and things will certainly get worse before they get better. BUT some experts believe that, as with ‘normal’ flu, as spring comes in the northern hemisphere the Covid-19 virus will find it harder to thrive, ie it may prove just as seasonal as more familiar strains. This is speculative, of course, as we know so little about this strain; but it is not an unreasonable hypothesis. and spring is now just around the corner, not only in Europe and the US but also across the MENA region.