What shape will global recovery from coronavirus crisis take?

Saudi passengers queue for a temperature check at terminal 5 in the King Fahad International Airport, designated for domestic flights, in the capital Riyadh on May 31, 2020, after authorities lifted the ban on flights within the country. (AFP/File Photo)
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Updated 11 June 2020

What shape will global recovery from coronavirus crisis take?

  • The outlook is uncertain as the world economy slowly reawakens from lockdowns
  • Recession caused by pandemic is almost three times as steep as the 2009 one, says World Bank

DUBAI: Over the past few months, economists who would normally be poring over charts and graphs have been studying individual letters of the alphabet.

Will it be a V, they ask, or a U, or maybe a W?

In a bad scenario, some said, it could be an L shape, where the economy flatlines. Middle East economists got into an argument by declaring that some cursive Arabic script was more appropriate.

This is not a debate about orthography, but rather concerning the most vital question about the global economy: What shape will recovery take? The answer will determine the how we live our lives in the “new normality” of the post-pandemic world.

The global economy has been in a coma since March, following the lockdowns that virtually every country in the world imposed on travel, work, consumption and social interaction.

By some calculations, economic activity has dropped more than 30 percent for the best part of two months.




Ground hostesses of the Emirates airlines wear face masks and assist travellers fromp behind glass windows at Dubai International Airport on May 22, 2020, after the resumption of scheduled operations by the Emirati carrier, amid the ongoing novel coronavirus pandemic crisis. (AFP)

The World Bank said in a recent report: “The pandemic represents the largest economic shock the world economy has witnessed in decades, causing a collapse in global activity. This would be the deepest global recession since World War II, and almost three times as steep as the 2009 global recession.”

Now, the global economy is slowly awakening from its slumber. Cars are on the roads again and a small number of planes are flying.

In some countries, economic production is approaching February levels. Shopping malls are reopening and people are spending money in shops and restaurants again.




A mask-clad man walks past shops in Saudi Arabia's holy city of Makkah on May 31, 2020 as lockdown measures are eased amid the COVID-19 pandemic. (AFP)

This recovery in economic activity is slowly spreading westwards from China, which was the first to fall into hibernation, and the first to wake.

The World Bank forecasts China’s gross domestic product (GDP) will be 1 percent up overall this year — way down on previous levels of growth but a credible outcome in the circumstances. Next year, a big recovery of nearly 7 percent is expected.

The wake-up call has tentatively reached Europe, where badly hit countries like Italy and Spain are easing restrictions. Continental GDP is expected to fall a huge 9.1 percent this year, but will recover to 4.5 percent growth in 2021.




A picture taken on May 31, 2020 shows vehicles driving in Saudi Arabia's holy city of Makkah as lockdown measures are eased amid the COVID-19 pandemic. (AFP)

In the Middle East, where infections and deaths have generally been at a lower level than the rest of the world but which has been hit by the downturn in global trade and the falling oil price, the World Bank is expecting a recovery to 2.3 percent growth from a big decline of 4.2 percent this year.

Saudi Arabia will resume growth at a level of 2.5 percent in 2020.

The US is the big conundrum. The world’s biggest economy got the virus late, but got it bad, with some of the highest death rates in the world.

THE NUMBER

1 billion

Workers globally at high risk of pay cuts or job losses due to pandemic

If the US economy is late coming out of the downturn, or falls back into recession in a second wave, that is a big problem for all of us.

Ian Bremmer, political and economic risk expert, said: “In the USA, all 50 states are now in various stages of reopening, and not one has yet experienced case increases significant enough that there is a change of trajectory in reopening.”

He warned, however, of potentially big economic stresses to come as the US gears up for the presidential election in November, amid increasing social unrest.




People sit at a cafe in a mall in the Saudi capital Riyadh on June 4, 2020, after it reopened following the easing of some restrictions put in place by the authorities in a bid to stem the spead of the novel coronavirus. (AFP)

The overall shape of recovery will probably be determined by the rate of startup in key individual economic sectors, and is likely to be uneven.

In the airline sector, one of the big drivers of the globalized pre-pandemic economy, the signs are still pretty gloomy. Very few planes are in the skies (except in the US, where domestic flights continued at comparatively high levels throughout) and airlines are hesitant on when they can resume anything near a normal service level.

Dubai’s Emirates, one of the biggest international carriers, said recently it did not expect any significant recovery until 2023.

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The global industry is expected to lose $83 billion in 2020, the International Air Transport Association estimated recently.

Road traffic, another key indicator of economic activity, is patchy. Some Chinese cities are reported to be virtually back to normal, with rush-hour congestion in Beijing and Shanghai once again a feature of Chinese life.

Americans got back on the roads for a recent public holiday, with motorists filling up at gas stations for the first time in months leading to an upturn in fuel usage. But big car cities like New York and Los Angeles still report eerily empty streets. Europe is witnessing a patchy but appreciable return in road traffic.




In this file photo taken on June 5, 2020, people observe social distancing while gathering to watch the Dubai Fountain show which resumes as the Gulf emirate emerges from a lockdown imposed due to the COVID-19 pandemic. (AFP)

The other critical gauge of economic activity, the oil market, has pulled back significantly from the chaos of April, as Saudi Arabia and Russia agreed to continue the biggest cuts to supply in oil history.

Prices in May enjoyed their biggest proportionate increase ever, back above the $40 per barrel.

Global demand for oil is still way down, and will continue to be for the rest of 2020, but at least the supply side of the equation is heading towards some balance.

The consensus of oil price forecasts is around $35 per barrel average this year, possibly rising above $50 in 2021.




Visitors wearing face masks use the escalators at the Ambience mall as places of religious worship, hotels, restaurants and shopping malls are allowed to operate again after more than two months of lockdown imposed as a preventive measure against the COVID-19 coronavirus in New Delhi on June 8, 2020. (AFP)

One cause for comfort so far in the three-month global economic collapse has been the fact that financial markets have not experienced the same downturn.

After an initial slump in stock markets in March, the indices have recovered almost to pre-pandemic levels as governments pumped money into the financial sector to head off another, more damaging crash.

The outlook on a whole range of other economic activities — from container shipping figures to footfall in malls through to global hotel occupancy — tells the same story: Current savage recession, immediate future improvement, outlook uncertain.

But there are big imponderables that could hit the global economy hard once more. Has the full pandemic story emerged in big economic blocks like South Asia, Africa and Latin America?




Shoppers walk past re-opened shops and businesses on O'Connell Street in central Dublin, Ireland on June 8, 2020, as lockdown measures are eased during the novel coronavirus COVID-19 pandemic. (AFP)

What will be the economic effect of a second wave of virus infection, or a mutation that confounds the slow progress towards a vaccine?

The World Bank report describes three possible outcomes. On the “upside scenario,” pandemic controls are largely lifted by the end of this month and “all major economies splutter back to life in the third quarter”. That is the V shape the economists talk about.

In the “downside” scenario, “measures that had previously begun to ease are quickly and aggressively re-introduced,” over the summer as infections accelerate in a relaxation of social-distancing rules.

In this case “persistent and severe financial market turmoil would cause a notable spike in bankruptcies worldwide and trigger serious bouts of financial distress in many emerging markets.” That is the W, or even the L, shape that the experts fear.

But there is so much uncertainty about global economic prospects that the economists will probably have to invent a new letter for the alphabet.

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@frankkanedubai


INTERVIEW: Abeer Al-Fouti sees Alwaleed delivering global response to COVID-19 pandemic

Updated 11 July 2020

INTERVIEW: Abeer Al-Fouti sees Alwaleed delivering global response to COVID-19 pandemic

  • Abeer Al-Fouti explains how the philanthropic world has come together in the COVID-19 era

DUBAI: Charity begins at home, they say, but in the era of the world pandemic such a domestic-focused approach is neither desirable nor effective.

That is why several global philanthropic organisations, and big name donors, have come to the fore in the course of the COVID-19 crisis to offer financial, practical and logistics support to those people in the world whose governments do not have the means to extend assistance to their entire population.

Perhaps the best known is Bill Gates, the American entrepreneur who has pledged to give away his entire multi-billion dollar fortune to beat the virus. Other eminent entrepreneurs have also given billions in the attempt to find an elusive vaccine or effective treatment.

But Saudi Arabia has its own famous philanthropist in the shape of Prince Alwaleed bin Talal, the Kingdom Holding magnate, who has for many years been dispensing charity via his organization Alwaleed Philanthropies.

Abeer Al-Fouti runs the global side of that enterprise and is convinced that only a global approach will work in the face of the biggest health challenge for nearly a century.

“The simple message is that actually COVID-19, despite all the challenges, whether economic, or emotional or health or luck, has one important lesson that we have all learned, or should learn: That we are one world, we are one.

“If you think selfishly, it is going to come back and haunt you anyway. So this is the time when we all need to come together and think we are one. Otherwise, we are all going to go down together,” she told Arab News.


As one of the ambitious young women coming to prominence as part of the Vision 2030 strategy of female empowerment, she obviously takes great pride in her work.

“This year we’re celebrating 40 years of our existence. If I can summarize it in numbers, we’ve been working for four decades in six continents, serving 200 countries with 355 global partners. We’ve finished 1,000 projects and spent over $4 billion, and we reached one billion beneficiaries across the world. That’s our latest update. And it’s all run by 10 Saudi females from Riyadh,” she said.

Alwaleed Philanthropies plays a major role in charitable giving within the Kingdom, supporting organizations and individuals across the spectrum of community development, health, education and empowerment. But Al-Fouti’s responsibilities are more global.

“I believe philanthropy pays a major role in filling the gap, with a regional platform bringing the government and private sector together, and focusing on those who maybe the system does not serve or does not cover. This is why His Royal Highness called us together, to do our research and then to explain who we think we should support,” she said.


“We decided to focus on those that were most vulnerable in the Arab world, in the Middle East and Africa,” she said.

Fighting the pandemic has been the main focus for the organization since the virus broke on the world earlier this year. In April, Alwaleed Philanthropies gave an extra $20 million to provide medical and economic help to poorer countries during the pandemic, bringing its total COVID-19 support to $30 million, on top of its usual budget.

“In these times of unprecedented crisis it is more important now than ever that we pull our resources together in the battle against COVID-19. With many developed nations struggling to cope with the COVID-19 pandemic, we must spare a thought for the developing countries of Africa and the less fortunate countries in the Middle East,” Prince Alwaleed said then.

“I’m sure you know it’s in the DNA of our culture and our religion — giving and charity. Everyone is required to give as part of the culture,’ Al-Fouti added. Alwaleed’s work runs alongside an equally generous program of charitable initiatives funded by the government of Saudi Arabia for projects both within the Kingdom itself and the rest of the world.


Maintaining the international partnerships that have been cultivated over the decades is a vital part of her work. The Gates Foundation, Gavi, the vaccination organisation, the World Health Organization and the United Nations are important allies in the global sphere.

“We have criteria for selection, and mainly we want to work with partners that are credible and share common values, and those which have long-term impact, in addition to other criteria. We have a detailed list of criteria and we tick those which have compatibility, reliability and credibility. We have to ensure that the money we give will reach those in need,” she said.

Another important ally is the Islamic Educational, Scientific and Cultural Organization, ISESCO, which has partnered with Alwaleed on many regional projects.

“We support initiatives in 200 countries, regardless of gender, race or religion — as long as they have shared values,” she explained.

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BIO

Born: Alkhobar, Saudi Arabia

Education: Bachelor’s and master’s degrees in health and hospital administration, King Saud University

Career: Various roles in government and private sector in human development, management and public relations

- CEO Al-Khair

- Partner, RVCC property development

- Co-founder, Smile Productions

- Executive manager, Global initiatives, Alwaleed Philanthropies

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Those initiatives fall into four main categories. Community development involves work on essential infrastructure — housing projects, employment initiatives and educational opportunities to help achieve the UN’s sustainable development goals.

Second comes empowerment initiatives for women and young people. In partnership with international institutions such as the UN, Alwaleed works to enhance opportunities for underprivileged women across the Middle East and Africa and to advance the interests of the big youthful demographic in the region. “We want people to become self-sufficient and empowered, Al-Fouti said.

For example, Alwaleed was a leading partner in the Turquoise Mountain project in Afghanistan, which sought to revive traditional craft industries in the war-ravaged country, providing employment for thousands of women and young people and helping to restore traditional buildings for use as medical and educational facilities.

Next comes disaster relief, again often in conjunction with UN organizations. Alwaleed played an active role in helping Albania to recover from the recent earthquake there, for example.

Finally, there is what Al-Fouti regards as her “favourite” work — the initiatives to “bridge cultures” through educational and cultural activities in several countries. Alwaleed is involved in projects in the Louvre in Paris and with Berlin Museum to explain Islamic culture to Europeans.

“We believe the best way for people to understand each other is through art and culture. We’re planning to work this year with all our educational centres, and with the Louvre and Berlin, to see how we can revisit this strategy and see how we can have more impactful projects in terms of bringing people together,” she said.

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READ MORE: Alwaleed Philanthropies, ICESCO MoU to help 10 African countries

Prince Alwaleed pledges $30m to fight pandemic

How Louvre-Saudi Islamic cultural ties are promoting peace and tolerance

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But the reaction to the pandemic has understandably taken up a lot of the organization’s time this year.

“We decide to get in and minimize or control the spread of the virus by strengthening local capabilities, for example through or work with ISESCO. In Africa they asked us to provide them with masks and with alcohol cleaning products. We decided that we were also going to go in and create or scale up factories, get jobs going and make the initiative available and sustainable, and this is what we are doing,” Al-Fouti said.

Through the collaboration with Gavi, Alwaleed has been able to bring medical relief to remote areas in the region. One of the repercussions of the pandemic has been that other essential medical projects, such as polio vaccination or routine immunization for children, have been scaled back drastically, partly because of travel restrictions but also because of the pressure on funds.

“In some places when people were being asked to stay at home, some didn’t have a home to go to. They were asked to wash their hands and they didn’t have water. That’s why we invested in areas where we thought there is a gap,” Al-Fouti explained.

So, those 10 women in Riyadh have the support and back-up of hundreds of partners around the world, with a global perspective in the midst of the COVID-19 crisis.

“We have partners and embedded collaborative relationships that we consider to be an extension of our team. So we are not alone. There is a saying ‘work smart, not hard.’ But we work hard as well. In fact, we really do work hard,” she said.