MENA economies face $116 billion hit from virus, oil slump: World Bank

Still waters: Beirut’s waterfront is almost deserted after a coronavirus lockdown. Countries in the region face multiple threats from social distancing curbs, falling export demand and a collapse in oil prices, according to the World Bank. (AP)
Short Url
Updated 10 April 2020

MENA economies face $116 billion hit from virus, oil slump: World Bank

  • Report warns of ‘uncertainty and fear’ amid calls for transparency to help region recover from twin economic shocks

DUBAI: The Middle East and North Africa (MENA) is facing a 3.7 percent contraction in gross domestic product (GDP) this year because of twin hits from the coronavirus pandemic and the collapse of demand for oil, the World Bank is forecasting.

The fall in GDP, which amounts to about $116 billion off the region’s economies, has accelerated from the 2.1 percent downturn the bank estimated just last month. In October 2019, the bank said Middle East economies would grow by 2.6 percent this year.

Ferid Belhaj, the bank’s vice president for the MENA region, said: “More than any other region, MENA is confronting two distinct but related shocks with the spread of the virus and the collapse in oil prices.”

The gloomy forecasts were contained in a new World Bank report entitled “How transparency can help MENA.”

The bank left open the option to change its forecasts again if deteriorating economic conditions warranted that.

FASTFACT

3.7 %

MENA is facing a 3.7 percent contraction in GDP this year.

“The costs of the current crisis are fluid, because it is difficult to predict how the global economy, national policies, and societies will react as the pandemic spreads,” the report said.

The bank said greater transparency, identified as a structural defect in the region, would help an economic recovery once the spread of the pandemic is halted.

“Across the region, transparency can help lead to growth with enhanced trust in government in the years and decades to come,” Belhaj said.

But the report left no doubt as to the severity of the situation in the region. “As the coronavirus pandemic sweeps across MENA, uncertainty and fear are gripping the streets. While citizens have turned to their governments to act, decades of lack of transparency has bred distrust and undermined State credibility,” it said.

Opinion

This section contains relevant reference points, placed in (Opinion field)

“People cannot be certain if daily reporting and updates are true. As someone aptly described the leadership response to the coronavirus: ‘When you lose people’s trust, even when you tell the truth, people won’t believe you’,” the report added.

“Since the beginning of the 21st century, growth of output per capita across MENA has been lower than what is typical for economies with the same levels of development. The authors argue that if the region had grown at the typical rate observed in the rest of the world, the region would be at least 20 percent richer than it is today,” the World Bank said.

“The lack of data and transparency in the region could be at least partly responsible for the region’s chronic low-growth syndrome. Indeed, as this report demonstrates, MENA stands out as the only region of the world to experience an absolute decline in their index of data transparency between 2005 and 2018,” it added.

“The pandemic is affecting MENA economies across four channels: The deterioration of public health; falling global demand for the region’s goods and services; declines in MENA’s domestic supply and demand because of social distancing measures; and, importantly, falling oil prices.”

Last week, the bank unveiled a $160 billion financial support package for developing countries.


GM energizes Chinese electric micro car market

The Wuling Hong Guang MINI EV, below. (Supplied)
Updated 21 min 39 sec ago

GM energizes Chinese electric micro car market

  • Trend toward a new segment of EVs in the country following changes to government subsidies

BEIJING: When 32-year-old photographer Jaco Xu needed a run-around car for work in the eastern city of Hangzhou, the price tag on the latest micro EV from GM’s China joint venture overcame his qualms about electric vehicles.

Xu paid 38,800 yuan ($5,735) for his tiny two-door Wuling Hong Guang MINI EV, while the basic model retails for just 28,800 yuan ($4,200), making it China’s cheapest EV.
“It feels pretty good. The price is so low and the appearance is simple and beautiful,” said Xu. “Why would I hesitate at that price?“
Launched in July, the Wuling MINI is heading a trend toward a new segment of EVs in China following changes to government subsidies — smaller vehicles with less range between charges, but a super-cheap price tag.
Despite basic features — no safety air bags, optional air-conditioning and a driving range of less than 200 km (125 miles) due to a smaller battery — buyers have been enthusiastic.
SGMW, GM’s venture with partners SAIC Motor Corp. and Guangxi Automobile Group, sold about 15,000 of the vehicles in August, making it China’s top-selling EV for the month, surpassing Tesla’s popular Model 3.
The venture plans to expand manufacturing capabilities of the new model, turning out cars at its plant in Liuzhou as well as its existing facilities in Qingdao, said Zhou Xing, SGMW’s branding and marketing director.
“We positioned this model as a ‘people’s commuting tool’,” he said, speaking ahead of the Beijing auto show that starts on Saturday. “Customers can drive their cars to work every day.”
The target market includes people like Xu who are looking for a city run-around as a second car, rural buyers who want a vehicle to move goods and young first-time buyers who are motivated by price.

HIGHLIGHTS

● GM JV micro car is China’s best-selling EV in August.

● Wuling MINI EV targets new EV buyers, sells from $4,200.

● Leads trend to smaller cars, batteries after subsidy cuts.

Total sales of new energy vehicles — including electric, plug-in hybrid and hydrogen fuel-cell vehicles — are expected to reach 1.1 million vehicles in China this year, about 5 percent of total auto sales. The micro car represents a shift in what typifies a mainstream electric vehicle, as policymakers push for increased EV production and sales have been bolstered by restrictions on petrol-fueled cars.
In response to government requirements to win generous EV subsidies, automakers over the past decade have developed higher energy-density battery systems to allow cars to drive for longer with a single charge.
Tesla’s Model 3, which has a range of more than 400 km, has been the market leader in China for most of 2020, retailing for about $43,000, about 10 times the cost of the Wuling MINI.
However, China cut subsidies heavily in 2019 and is now asking for higher EV power efficiency to save energy. Automakers, in turn, are planning more smaller EVs with a moderate driving range aimed at customers who can charge cars easily, industry executives said.
The economics are skinny. Wuling MINI will not get EV subsidies due to its short range. For SGMW, the cheap price tag means it makes very little money at best, according to insiders.
EVs, however, generate green credits for SGMW that can be used to offset negative credits of other companies like SGM, its sister venture which is expanding a lineup of bigger SUVs under Buick, Chevrolet and Cadillac marques.
“Selling micro EVs in China makes more sense this year,” said a product planning official at a GM rival. “Subsidies have become a less important factor of pricing as government has already cut a lot, while green credits are expected to become more expensive,” the official said.
Bidding to reverse a sales decline due to a slower economy and stiff competition, GM expects EVs to make up more than 40 percent of its new launches in China over the next five years.
The Detroit automaker is revamping plants in Shanghai, Wuhan and Liuzhou under its two Chinese JVs to enable production lines making gasoline cars to turn out EVs, public documents detailing its constructions plans show.
For now, the Wuling MINI is the cheapest EV, but it faces competition from the cheapest models from rivals BYD and BAIC BluePark.
Great Wall Motor and Toyota’s China partner GAC are also planning more electric models with a range below 400 km, company officials said this month.
And startup Kaiyun Motors is trying to radically lower the price of its new electric pickup truck Pixel to about 20,000 yuan for urban delivery services, although these EVs will be sold without batteries, allowing consumers to swap them.