The spread of Covid-19 across China has led global financial markets to take firm steps towards the spread of the virus in Europe and the Middle East. Measured actions should be considered through analyzing market signals, recovery patterns in addition to the history of the epidemics to pick up some insights into the needed path.
For instance, there has been a slowdown in the Chinese growth from 6.1 percent in 2019 to about 5 percent in 2020. So how will the rest of the world fare?
The global economy might suffer a serious hit or even recession in some markets due to Covid-19. Among others, Real estate markets and stock markets are expected to undergo some recession for the time being.
The impact of coronavirus Globally
The cruel disturbance in the global financial market indicates its path to a recession. U.S. government has lowered records of long-dated bonds at negative 116 basis points. As a result. The models of recession have ticked higher. First, the impact of Covid-19 has not been uniform. On the other hand, credit spreads had risen notably little. Equity valuations have fallen from recent highs, but they have still ascended relative yo their history. Therefore, volatility has marked the greatest strain, in the past 30 years, next-month volatility has periodically been putting implicit with the same level of series disturbance unparalleled of the financial crisis.
Mena Region Economic Risks
Coronavirus (Covid-19) economic impact on GCC economies and the broad Middle East and North Africa (Mena) could be greater than primarily expected.
Since the speed and great extent of the virus reach through the world and the region, this infection will have harsh results for the Middle East and North Africa (Mena) economies, especially the oil-exporting, resulting in a downward variation of its growth.
It was stated that they are working on the supposition of containing the coronavirus (COVID-19) outburst in early February with insignificant consequences in the MENA region. Since that time, the global supply chain derangement becomes sharp and the increase of incidences has started to count on wastefulness in some Mena areas.
For example, The GCC record of infection at 46 cases of coronavirus in Kuwait, 38 in Bahrain, six in Oman and 21 in the UAE since March. This data of the virus shapes its dark shadow in the Middle East, and the effect of the regional economies is greater than its evaluation.
UAE and Gulf Real Estate Industry
The United Arab Emirates is a regional business hub in Gulf countries and the most prominent transit point for passengers traveling to China and other points in Asia. The schedule of loans has been changed and fees and commissions have been reduced to measure the economic effect of the virus by the central bank of UAE request.
A risk of the economic impact could increase if the virus spreads unpredictably. For instance, Gulf real estate could drop in the industry prices in the area that could lower its rate especially UAE. Since the direct contact between the UAE and Chinese buyers expected to be less in participation due to the growth of this pandemic virus.
Other Gulf countries are impacted as well, upon the spread of the coronavirus Gulf countries like UAE, Bahrain, and KSA might take the most hit, as they are the most active countries in terms of internal visits and accommodations for tourism.
For Example, the Kingdom of Saudi Arabia has temporarily banned visits, even for religious tourism and has temporarily stopped all commute to and from countries with reported cases. All flights to those countries were canceled and even roads are temporarily closed. This resulted in major hits to the newly developed tourism sector in the Kingdom.
Stopping all commute also affects the kingdom of Bahrain, especially the tourism and real estate sectors in the Kingdom.
Because of the active bond between Bahrain and Saudi Arabia, a large number of tourists visit Bahrain each year, and a large number of investors choose to invest in the booming real estate market there. As reported by a prominent real estate company in Bahrain, there might be a temporary quiet phase until things are more clear
As for Bahrain, The Kingdom also announced stopping flights to and from infected countries to restrict the spread of the virus in the country.
However, Saudi Arabia and Bahrain are not alone in this having blocked the flights in the gulf area, the real estate industry’s rate decreases and all the gulf areas are operating this case. The kingdom of Bahrain has not approved the impact of these restrictions on the market, but it is essential. Travel bans and flight hang will have a direct influence on the local sectors, economics, and the real estate market.
Upon the cooperation of the Gulf areas, rents and sales of the apartments will be directly lower in the rate of residency. The countries are not sure how to rebound since the magnitude of the spread of the virus continues on the local and more globally, and its growth consequences are extended. Subsequently, gulf areas are taking restricted precautions to contain the virus hoping a clear jump for the market on their previous rate.