Reopening of businesses paves the way for normalcy
Easing of lockdowns and social distancing measures across the GCC are signs that these states have passed the peak with a flattening in the curve of new COVID-19 cases, says a report.
As of now, it may be too early to predict whether the opening of most businesses will help the economic activities, says MUFG, a global financial services group, in its latest MENA Economic Weekly report.
Despite the phased easing in restrictions, the GCC by no means can take it easy. The past few months have been strenuous and destabilising. The region is steadily looking to revive the post-COVID-19 path towards a new normal.
Lessons from early openers across the world
“Our examination of countries that have reopened more versus less speedily across the world so far offers three encouraging lessons,” the report notes.
First, early reopeners have not witnessed higher confirmed COVID-19 incidences thus far.
Second, corporates and broader financial markets have tentatively begun to reward the early reopeners with modestly higher asset returns. Offering more comfortable financial conditions, in contrast to the “peak lockdown” period of early April, when reopening was associated with lower asset returns and tighter financial conditions. Third, not all reopenings are homogeneous with heterogeneity abound across countries, and if medical outcomes can avoid left tails, corporates and markets may reward reopenings.
Looking ahead
Certain events split eras into times before and after. Our age will be defined by a fundamental division: what we knew as normal before COVID-19 and the new normal that will emerge in the post-viral era – the next normal. For the GCC economies, the conversation is beginning about what the next normal could entail and how sharply its contours will diverge from those that previously shaped the region.
What is evident in the immediate term is that all these countries continue to grapple with both the demand-side shock caused by COVID-19 induced restrictions and the supply-side shock caused by the oil price collapse. Facing either one of these shocks would be unprecedented. The combination of the two, signals a sudden deep and acute recession this year, with risks skewed to the downside.
Most GCC countries have eased restrictions
Saudi Arabia started implementing a three-phased approach to easing restrictions, with all curfews to be lifted by June 21. However, the Kingdom decided to temporarily reimpose some restrictions in Jeddah city starting June 6 until June 20 as part of efforts to contain COVID-19 outbreak. The new measures include restricting movement in all areas of the city from 3 pm to 6 am, halting all workplace attendance for employees in both the private and public sector, and prohibiting dining in all restaurants and cafés. Domestic flights resumed from June 1, but international flights remain suspended, until further notice.
Dubai has announced new measures lifting restrictions on businesses, allowing gyms, movie theatres, leisure venues, educational and training institutes, children’s learning centres and all retail and wholesale establishments to reopen at varying capacities from May 27. The Dubai airport also began welcoming returning residents, subject to 14 days on arrival quarantine, and passengers on transit. Beginning June, all government employees resumed work, along with 100% of privatesector employees allowed to work from offices.
There are no restrictions on movement between 6 am and 11 pm, while maintaining safety and social distancing measures. People above the age of 60 and below the age of 12 are not allowed to enter malls, sports facilities, educational institutes and cinema theatres.
Bahrain was among the first countries to ease lockdown
Bahrain announced the reopening of the retail sector from April 9, joining only a few countries worldwide in relaxing restrictions imposed to slow the spread of COVID-19.
The GCC state also followed it up by allowing shopping malls and more retail stores to resume business from May 7, while restaurants remained closed to in-house diners. Following the announcement, Bahrain-based shopping mall developer and operator Seef Properties reopened all its three shopping malls located in the Seef District, Muharraq and Isa Town from May 8.
Also, all salons and barbershops began reopening from May 27, while ensuring the compliance of health and social distancing guidelines. Professional sports players are also allowed to resume their sport exercises in outdoor spaces and swimming pools. Drive-in cinemas can operate, so long as health and social distancing guidelines are followed. Indoor cinemas will remain closed.
Bahrain’s decision to lift restrictions came after the data from Google research cited that the GCC state experienced the least drop in the movement of -21.2% amid COVID-19 pandemic. Across all metrics, the average reduction for the whole of the GCC during the first three months of 2020 was 34.1%. Bahrain was followed by Kuwait (-36.3%), Oman (-37.8%), Saudi Arabia (-38.5%) and the UAE (-42.33%). The grocery and pharmacy segments were least impacted across the region. The respective changes recorded ranged on average of -27% and +22.83%.
Most substantial effects were recorded in the transit and retail segments, with an average fall of 60% and 53.2% respectively, due to a series of protective measures against COVID-19 put in place across the GCC.
Bahrain’s response, which drew praise from the World Health Organization during the early stages of the outbreak, involved keeping open retail establishments and other essential facilities while increasing public testing capabilities.
Dr Omar Al Ubaidly, director – studies and research of Bahrain Centre for Strategic, International and Energy Studies (Derasat), said, “The question of how to balance health and economic interests during the pandemic is a tough one faced by all countries at present. What is certain is that any trade-off between the two is improved significantly by having better levels of preparation and testing. Bahrain’s early steps have allowed it to maintain more normal lifestyles for its residents, while still limiting the COVID-19 spread.”
Oman has allowed a limited number of commercial businesses to reopen, including money exchanges ahead of the start of the holy month of Ramadan. Establishments such as car and fishing boat repair workshops, spare parts stores and shops selling electronic goods were among those allowed to resume operations.
Oman further allowed the resumption of business activities and ended the lockdown within the capital, Muscat from May 29. Part of the capital area, which recorded most COVID-19 cases, remains under curfew. From May 31, 50% government and private sectors employees have returned to work.
Kuwait did not extend its full curfew beyond May 30 and instead switched to a 12-hour partial curfew from 6 pm to 6 am commencing May 31, as part of a five-phase plan.
There are few signs of an imminent easing of restrictions in Qatar as cases continue to rise. Qatar’s Minister of Health stated on May 21 that the country is entering the “peak stage” of its COVID-19 outbreak. New cases have averaged over 1,750 a day since then, up from 1,480 a day in the previous sevenday period. ■