Businesses across the tourism, retail, hospitality, logistics and contracting sectors of Saudi Arabia and the UAE are suffering as bankers warn of liquidity concerns and oil prices tumble.
Saudi and UAE authorities have announced nearly $70bn (€62.5bn, £55.6bn) in economic stimulus to ease the impact on businesses of the coronavirus outbreak.
Leisure and tourism has been seriously affected: Saudi authorities closed Mecca at the end of February due to Covid-19 concerns and Emirates has suspended flights until at least April 8.
Retail businesses in the region have reported concern about cash flow amid order cancellations. Bankers have warned of liquidity issues.
Now there are fears that the impact is spreading to the contracting industries. Last week Saudi Arabia announced suspension of work on the third phase of a $100bn expansion of the Grand Mosque in Mecca over coronavirus fears, according to Reuters.
Two days earlier, construction giant Saudi Binladin Group said in an internal note, seen by Reuters, that two employees on the project had been infected.
A vicious cycle is emerging: with the coronavirus pandemic hitting oil prices, the revenue that both states rely on to power fiscal stimulus packages to help flailing companies is also dwindling.
Both countries are projected to have increased deficits in 2020. Saudi Arabia’s debt-GDP ratio was around 20 per cent in 2019. According to rating agency S&P it will rise to nearly 34 per cent in 2020 and about 36 per cent in 2021.
S&P expects the fiscal deficit of the government of Abu Dhabi, the richest of the UAE’s seven emirates, to increase to 7.5 per cent in 2020, compared with 0.3 per cent in 2019.