Mideast countries’ non-oil private sector shrinks amid COVID-19 pandemic

The UAE non-oil private sector also fell to a record rate for the second month running in April, as lockdown measures to fight the coronavirus pandemic piled pressure on an already sluggish economy. (File/AFP)
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Updated 05 May 2020

Mideast countries’ non-oil private sector shrinks amid COVID-19 pandemic

  • Saudi Arabia's private sector shrank for the second consecutive month in April
  • Egypt was also hit by a shutdown in the tourism industry

Revenue of non-oil private sectors across the Middle East shrank, as coronavirus-prompted lockdowns hammered the economy, reports showed.

Saudi Arabia

Saudi Arabia's non-oil private sector shrank for the second consecutive month in April and its output hit a record low as lockdowns and business closures to tackle the new coronavirus hammered the economy, a survey showed on Tuesday.
The seasonally adjusted IHS Markit Saudi Arabia Purchasing Managers' Index (PMI) rose slightly to 44.4 in April from 42.4 in March, which was the lowest reading since the survey began in August 2009.
April is only the second time the headline index has fallen below the 50.0 mark that separates growth from contraction. The slight rise from March reflected "a slower reduction in new work and a stronger contribution from the suppliers' delivery times component," the survey compilers wrote in a report.
"Saudi Arabian private sector output fell at the fastest pace since the survey began more than a decade ago, reflecting widespread business closures and a sharp reduction in customer demand," said Tim Moore, economics director at IHS Markit.
"Export sales and international supply chains were also severely impacted by the global COVID-19 pandemic in April, with both indices hitting survey-record lows," he said.
As of May 3, Saudi Arabia had reported 27,011 cases of COVID-19, the disease caused by the new coronavirus, and 184 deaths - both the highest out of the six Gulf Cooperation Council countries.
The kingdom has taken strict measures to curb the virus, including curfews, business closures and travel restrictions. It has allowed some malls to reopen for limited hours, but restaurants, schools, mosques and other public places remain shut.

Egypt

Egypt was also hit by a shutdown in the tourism industry, weakening demand and the imposition of a curfew as the government battled the new coronavirus pandemic.
IHS Markit's PMI for the non-oil private sector came in at 29.7 last month, down from 44.2 in March and far below the 50.0 threshold that separates growth from contraction. It was the lowest reading since the survey began nine years ago.
"The reading signalled a severe decline in business conditions," IHS Markit said.
The pandemic led firms to put in place large cost-saving measures, including labour reductions, and caused some to close altogether, IHS Markit said.
The novel coronavirus's spread virtually shut down Egyptian tourism, which International Cooperation Minister Rania al-Mashat last week said accounted for 5% of gross domestic product. The last scheduled airline flights to Egypt ended on March 19.
Restaurants, coffee shops and hotels have also been shut down, and a curfew is in place from 9:00 pm to 6:00 am.
"Businesses lucky enough to remain open scaled back activity on a massive scale, as many highlighted sharp falls in domestic sales and foreign demand," said IHS Markit economist David Owen.
The new orders subindex plunged to 14.1 from 40.2 in March, the worst reading in the last nine years. Purchasing slid to 21.0 from 39.5 in March as companies drew down inventories in the face of uncertain demand.
The contraction in staffing, however, remained relatively subdued, with the employment subindex inching down to 46.1 from 47.0.
"Business expectations remain strong though, in fact improving since March, which may suggest firms will look to retain workforces for when the economy reopens," Owen said.

UAE

The United Arab Emirates' (UAE) non-oil private sector also fell to a record rate for the second month running in April, as lockdown measures to fight the coronavirus pandemic piled pressure on an already sluggish economy.
The seasonally adjusted IHS Markit UAE Purchasing Managers' Index (PMI), which covers manufacturing and services, fell to 44.1 in April from 45.2 in March. The 50.0 mark separates expansion from contraction.
The output and new export orders sub-indices fell sharply, both falling to record lows since the survey began in August 2009. Output tumbled to 39.9 in April from 47.2 in March.
"Shop closures and restrictions in domestic and international travel had huge repercussions on new business, which fell at an unprecedented pace after also declining sharply during March," said Owen.
"Business sentiment reached the lowest in nearly three years, reflecting heightened uncertainty from the COVID-19 crisis. While firms on balance remain optimistic of growth in the coming year, some panelists were apprehensive, noting that the risk of an economic downturn was increasing," Owen said.
As of May 3, the UAE had reported 14,163 cases of the novel coronavirus and 126 deaths, the highest number of deaths after Saudi Arabia among the six Gulf Cooperation Council countries.
The authorities have imposed strict lockdown measures to stem the spread of the virus, including a 24-hour curfew in Dubai that was eased in late April as the Muslim fasting month of Ramadan began.
Malls, dine-in restaurants and cafes in Dubai, the country's business and tourism hub, were allowed to resume operations with limited capacity. This week, malls in the capital Abu Dhabi began to reopen and Sharjah followed.
But travel, tourism and trade, major contributors to the economy, both remain largely at a halt.
"Tourism declined sharply again, as countries worldwide imposed similar restrictions amid the virus pandemic. Along with reduced demand from foreign clients, this led to a steep fall in export business, one that was unprecedented in the survey history," the report said.
New export orders fell to 35.2 in April from 44.3 in March.


Indonesia turns focus to energy security and renewables amid pandemic

Updated 24 November 2020

Indonesia turns focus to energy security and renewables amid pandemic

  • Govt. aims to use of opportunity presented by COVID-19 outbreak to make transition

JAKARTA: The fallout from the coronavirus pandemic has presented Indonesia with the opportunity to work toward energy security and switch from conventional to renewable sources, officials have said.

“Indonesia has made various breakthroughs such as making use of biodiesel B30,” Foreign Minister Retno Marsudi said during an online press conference on Sunday, quoting President Joko Widodo’s address during the G20 Summit.

“(We) will be conducting tests on green diesel D100 from palm oil – which will absorb 1 million tons of palm oil produced by farmers – and also install rooftop solar power plants in hundreds of thousands of households,” he added.

Widodo also made a reference to data from the World Economic Forum on the massive potential of the green economy, which could generate up to $10.1 trillion and create 395 million new jobs by 2030.

Earlier this month on Nov. 4, energy and mineral resources minister Arifin Tasrif said that the current difficulties posed by the pandemic had spurred Indonesia to accelerate the energy transition, by developing renewable energy, ensure efficiency and work toward maintaining energy security for lasting energy independence.

Energy security and its steady supply were some of the top concerns voiced by Tasrif during the G20 energy ministers’ meeting in September.

“COVID-19 has created an economic crisis and shrunk energy demands. All G20 members must work together to ensure that the energy market is stabilized and maintain supply affordability. These are a top priority for Indonesia,” Tasrif said at the meeting.

He also lauded Saudi Arabia, the summit host, for pushing ahead with the 4Rs issue – Reduce, Reuse, Recycle, Remove – in the circular carbon economy (CCE) concept, which was endorsed by the energy ministers after their meetings.

Tasrif said the issue was an “important part of reintroducing the role of biofuel and hydrogen in the CCE platform,” and in line with Indonesia’s adoption of the mandatory use of biodiesel – containing 30 percent palm oil and known as B30 – from January this year, specifically in the transport, power plant, industrial and commercial sectors.

Indonesia, the world’s largest palm oil producer, has set a target to use 23 percent of renewable energy by 2025 and 50 percent by 2050, as part of its national energy mix plan.

The government has listed provisions for renewable energy and its conservation among its seven priority programs for next year and allocated 16.7 billion rupiahs ($1.2 million) for environmental preservation efforts in the 2021 budget.

“Our state budget is very much pro-green ... The government is already on the right track with the implementation of energy transition policy,” Arif Budimanta, a special presidential staff on economic affairs, said during an online discussion recently.

He added that President Joko Widodo had been very “hands-on” with the implementation of the energy transition policy and was directly supervising the progress of the policy.

Government officials claimed that the adoption of B30’s mandatory use – the first in the world – has been successful.

However, its target this year had reduced from the initial 9.5 million kilolitres to 8.3 million kilolitres, with 6 million kilolitres realized so far.

Mandatory use is expected to reduce carbon dioxide emissions by 16.9 million tons.

“The switch to a biodiesel program, which has been in place since 2015, has been able to replace almost 25 million liters of imported fossil fuel by June this year, and we have been able to save foreign exchange spending by roughly equivalent of 127 trillion rupiahs,” Eddy Abdurrachman, head of the Palm Oil Plantation Fund Management Agency said during a recent webinar.

Static tests on diesel engines for 1,000 hours of use of the biodiesel blend are underway at the Energy and Mineral Resources Ministry’s research and development lab.

The head of the research and development agency, Dadan Kusdiana, said on Aug. 26 that scientists had managed to conduct studies on the lab’s engine test bench after the COVID-19 outbreak restricted them from testing on the roads.

“We expect to wrap up the tests by the end of the year,” Kusdiana said.