UAE PMI continued to slip to 49.1 in February (January: 49.3) and is the lowest since August 2009, with declines across the output, new orders and employment. Output levels contracted for the first time in over ten years, after stagnating in January.
The number of economic licenses issued in the UAE grew by 0.34% MoM to 678,573 in February, according to the National Economic Register maintained by the Ministry of Economy. Abu Dhabi and Dubai together accounted for 68.6% of all licenses issued in February.
According to a member of the Federal National Council, the unemployment rate has reached ~13% among Emiratis, with ~40k youths out of 300k eligible workers active job seekers.
UAE will allow full foreign ownership in 122 economic activities in the industrial, agricultural and services sectors. This includes about 51 activities in the industrial sector (e.g. manufacturing food and drinks products and aircraft repair), 52 activities in the services sector (e.g. scientific R&D) and 19 activities in agriculture (e.g. cultivation of grains).
A Property finder report states that some 48,500 units will be added to the Dubai real estate market by September 2020.
As the Covid-19 cases touch 45 in the UAE, a decision was taken to close schools/ colleges/ universities for 4 weeks (bringing forward the spring break which was scheduled for end-March, followed by 2 weeks of online/ distance learning). This should ideally be supported by allowing for either flexi-times or better still “working from home” if possible. While the government allowed flexible work hours for its female employees with nursery-going kids during nursery closures, this practice should ideally be applied across the board in the private sector as well. Not only would this move lower contagion but could also be applied (if successful!) as a long-term policy for better work-life balance and improved overall happiness.
The Fed’s 50bps cut was matched by Bahrain, Jordan, Qatar, Saudi Arabia and UAE, given the peg to the dollar; Kuwait lowered its discount rate to 2.5% from 2.75%. The cut is quite opportune and will support consumption spending and local investment at a time when Covid-19 is disrupting supply chains, trade and also tourism.
Bahrain’s central bank issued a circular urging that banks and financing companies consider re-scheduling or granting deferrals on credit instalments, given the ongoing coronavirus outbreak. With about 85 persons affected in the island nation, these institutions were also asked to reduce profit and interest rates, fees and commissions or other measures for customers affected by the outbreak.
Egypt’s PMI remained under-50 in February, with a reading of 47.1 stronger than the previous month’s 46. Though improvements were recorded in both output and new orders, at 46.2, it still remained in contractionary territory. Weak external demand meant that export orders were sub-50 for the fifth consecutive month (39.4 in February vs January’s 38.5).
Lebanon’s PM confirmed that the country would “suspend payment” on the March 9 USD 1.2bn Eurobond. The government will proceed to restructure its debt, and the PM assured that deposits in the banking sector would be protected “especially small depositors who represent more than 90% of total bank accounts”. From the speech, the three pillars to move forward include: total public debt restructuring (sovereign & BDL), banking sector restructuring (recapitalization & consolidation), social safety net, macro-fiscal-financial-structural reform program with multilateral funding (IMF led). What was missing was any reference to a funding package to support the reform phase.
PMI in Lebanon improved slightly to 45.4 in Feb (Jan: 44.9); sentiment towards the 12-month business outlook fell to the weakest level in survey history, with political and economic instability the main cause for concern.
Qatar PMI increased to 49.3 in Feb (Jan: 48.7), with the output index at an 11-month high alongside a rise in non-oil private sector employment.
As Covid-19 cases across the MENA region increased, Saudi Arabia has temporarily halted all entry by land from the UAE, Bahrain and Kuwait (commercial trucks are the only exception). Entry is permitted only via the three international airports in Riyadh, Jeddah and Dammam. Furthermore, it suspended temporarily the Umrah pilgrimage and announced that the Grand Mosque in Makkah and the Prophet’s Mosque in Madinah will close an hour after the night prayer and open an hour before dawn prayers each day.
PMI in Saudi Arabia slowed to 52.5 in February (January: 54.9), posting the lowest reading since April 2018. Respondents referred to “subdued demand” and the “need to offer price discounts to stimulate sales”. New orders contracted, falling to 49.3 in February (January’s 52.6 and December’s 64.1), for the first time since April 2018.
Saudi Arabia launched an “instant visa” scheme to support entrepreneurship in the nation.
The Covid-19 outbreak continues to create havoc across capital markets: equity market sell-offs were rampant globally – European shares closed at near 7-month lows – except in China (where a two-year high was touched on Thursday, as investors expect more PBoC stimulus), while US Treasury prices rallied, with the yield on the benchmark 10-year government bonds dropping to a record low of 0.695%. Regional markets remained in the red, as Covid-19 cases increased, and travel restrictions were imposed. The dollar fell against a basket of currencies –worst week since 2016 – as traders bet further cuts following the emergency 50bps rate cut last week, while the flight to safe-haven currencies JPY and CHF continued. Oil prices fell to a near 3-year low and posted biggest daily loss in more than 11 years on Friday after Russia rejected OPEC’s proposed steep production cuts. Gold posted the biggest weekly gain since October 2011. As Covid-19 spreads, with over 100k infected, rising number of cases and deaths outside of China, global growth rates are being slashed: OECD warns that the virus could halve global growth, while the IIF estimates growth at around 1% this year, far below 2019’s 2.6%. Global manufacturing slumped to 47.2 in February (January: 50.4) – its lowest level since May 2009, suffering its steepest contraction in over a decade as Covid-19 outbreak hits supply chains and demand. Lengthening of supplier lead times was a constant reference in PMIs across the globe as manufacturers adjust to the supply shock reverberating across the globe. Meanwhile, central bank meetings will be closely watched after the Bank of Canada and Fed’s 50bps move (US macro data is yet to show an impact from the virus) though the ECB and BoJ have limited room to manoeuver. While lower rates are unlikely to result in companies investing more (given current supply chain disruptions and weak demand), much more can be achieved by providing adequate fiscal support: with the stimulus, governments can target spending where it is most needed (e.g. unemployment insurance, health spending, wage subsidies, tax reliefs).
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