Covid-19: Top Mena economies track global economic slowdown in March

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coronavirus, covid-19, non-oil business activity, Markit PMI

Dubai - This marked the third monthly decline in the health of the non-oil private sector in a row.

By Issac John

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Published: Sun 5 Apr 2020, 12:34 PM

Last updated: Sun 5 Apr 2020, 7:46 PM

Business conditions in the non-oil private sectors of Saudi Arabia, the UAE and Egypt remained challenging in March, amid the coronavirus pandemic with firms reporting reductions in output, new orders and employment, while seeing notable delays to supplier deliveries, IHS Markit surveys show.
IHS Markit Saudi Arabia Purchasing Managers’ Index registered below the neutral 50.0 threshold for the first time since the survey began in August 2009, while the UAE PMI dropped to a record low of 45.2 in March, from 49.1 in February, to signal a notable decline in operating conditions at the end of the first quarter. It reflected the decline in optimism across the globe as countries imposed restrictions to contain the spreade of the coronavirus outbreak.
Egypt’s non-oil private sector economy also failed to escape the pandemic, with disruptions to tourism and consumer spending causing marked falls in both activity and sales. Employment declined further, while confidence for future output dropped to a record low. On the bright side, input cost inflation remained subdued. The IHS Markit Egypt PMI fell from 47.1 in February to 44.2 in March, to indicate a sharp deterioration in business conditions at the end of the first quarter of the year and the strongest recorded since January 2017, the survey report said.
Tim Moore, economics director at IHS Markit, which compiles the survey, said the Saudi Arabia PMI hit a survey-record low amid emergency public health measures to halt spread of coronavirus in March.
“Output levels and incoming new work both fell at the fastest rate since the survey began in August 2009, but staffing levels dropped only slightly.”
David Owen, economist at IHS Markit, said the UAE’s non-oil private sector suffered a notable decline in business conditions in March, accelerated by the pandemic.
“New business volumes fell at a steep pace, driven by lower customer sales, reduced tourism and weaker trade as countries across the world closed borders,” he said.
Owen said firms rapidly took measures to ease cost pressures, lowering activity, purchases and workforce numbers. As a result, there was little change in total input costs overall.
Meanwhile, he said the closure of airports in the UAE and working-from-home policies, as seen across the globe, are likely to extend the downturn into April, particularly as there is no end in sight to the pandemic.
In the UAE, a decline in overall demand led firms to take steps to reduce activity and costs in March. Output was reduced for the second month running, and at a faster pace compared to February, said the report.
“However, part of the downturn was offset by higher activity at food sellers amid greater bulk-buying from consumers. In addition, firms continued to lower overall employment, extending the current period of decline to three months. The latest decrease was the sharpest on record. As well as businesses shedding jobs, many asked employees to reduce hours in order to further minimise costs.”
“The downturn also extended into firms’ buying activity in March, as purchases were reduced slightly from the previous month. Stocks of inputs were also limited amid weaker demand trends and a slowdown in delivery times caused by the virus outbreak. Lead times lengthened at the quickest pace in the series history, albeit only moderately overall. Meanwhile, softer demand meant that clients of UAE businesses struggled to pay for current sales in the latest period, leaving those orders,” said the report.
Owen said tourism was highlighted as a key area of disappointment as many countries closed borders and reduced flight travel. In Egypt, the impact was felt across the economy, with consumer spending also falling sharply.
“Companies responded with a quicker contraction in input purchases, showing that all parts of the supply chain will be affected by the pandemic. On the positive side, despite firms seeing the dollar rise leading to increased costs, overall input prices rose just marginally in March. This allowed a further drop in selling prices,” he said.
-- issacjohn@khaleejtimes.com


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