Opinion

Coronavirus could push major economies into the abyss

Coronavirus could push major economies into the abyss

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Military personnel outside the Duomo cathedral, closed by authorities because of the coronavirus outbreak, in Milan. (Reuters)

As I have said here before, it is wise that even the best political risk analyst approaches the world with a degree of humility. For example, if you had told me at the beginning of the year that I would spend the lion’s share of my February writing about a possible pandemic originating in Wuhan, I would have questioned your sanity. But life, while it does have patterns, does not move in a straight line. The absolutely central question remains: What causes things to actually happen and can they be foreseen?
Here, inevitably, we come back to the coronavirus. For all the global fear this near-pandemic has generated, I think the enduring political risk consequence of all that is going on is likely to be economic. While the virus is not the main cause of the possible economic calamities awaiting China, Iran and Italy — all of which were already teetering on the edge of economic downturns or worse — its unforeseen deleterious consequences could well provide the final nudge into a much deeper abyss.
The economic mismanagement that preceded the black swan incident was there for all to see; all it takes is a final unexpected setback to reveal how the world was living on borrowed time.
Of the three, superpower China is most likely to ride out the economic storm, but there remain serious risk concerns. For one thing, a full month after the paramount leader, Xi Jinping, announced to the world the extent of the coronavirus, much of the country, even those portions little-affected by the virus, have yet to return to work.
This, coupled with the fact that a gigantic area around Wuhan — the center of the virus outbreak — is under full quarantine (more than 50 million people, or approximately the population of Spain), means that every day the virus remains untamed is another body blow squarely directed at the Chinese economy. The longer this lasts (and at present the coronavirus shows no signs of burning out in this centrally affected region), the harder it will be for an embattled Beijing to rebound.
But, even before the coronavirus struck, there were some under-reported danger signs flashing regarding the continued vitality of the Chinese economy. Gross domestic product (GDP) growth had naturally slowed from its double-digit prime to an official number of 6 percent, though the real figure is universally thought to be lower — a natural consequence of the economy maturing.
Structurally worse, China’s perilous demographic position — a result of the decades-long one-child policy — means the country could well grow old before it grows rich. All of this was already well in place ahead of the advent of the coronavirus.
One long term and hugely disadvantageous consequence of the virus for Beijing is that China’s bungling initial response will accelerate the decoupling of the US and Chinese supply chains; a process already begun with the US-China trade war. The coronavirus could well mark an unexpected chapter in the undoing of globalization itself.
Italy’s glaring economic inadequacies are more advanced and, as a result, the danger from the unforeseen shock of the coronavirus is more immediate. A simple, glaring fact must be kept in mind when discussing the country: Italy is poorer now, uniquely in Europe, than it was at the time of the Great Recession in 2008.
The most recent GDP numbers emanating from Europe only confirm this decade-long sclerosis. In the fourth quarter of 2019, Germany, the motor of Europe, stagnated (growing at zero percent), while the economies of France (minus 0.1 percent) and Italy (minus 0.3 percent) actually went backwards. Compared with recent relatively buoyant growth rates in economic competitors China and the US, the past decade can be characterized in political risk terms as a time when Europe was simply left behind.
Italy’s fragile economy, bereft of anything approaching political leadership and direction, is greatly dependent on tourism, which accounts for fully 13 percent of its GDP. With the continent’s coronavirus cases centering on Lombardy and the Veneto, it is hard to imagine tourism not taking a fearful hit this year. And, with this, Italy may well fall off the economic tightrope it has long been walking on and into the abyss.

All it takes is a final unexpected setback to reveal how the world was living on borrowed time.

Dr. John C. Hulsman

Iran, despite its hapless and feckless denials, is another emerging center of the outbreak. Years of governmental economic mismanagement and the surprisingly effective sanctions ushered in by the Trump administration as a result of its regional adventurism had already left it a basket case; it is projected that GDP slumped by a whopping 9 percent last year. A further shock to this imploding system could well lead to political and economic upheavals that have not yet been thought through.
In each case, the coronavirus has not caused the problems to come; rather the epidemic amounted to the last unforeseen negative consequence, enabling an already precarious situation to get out of hand. This is how the world really works, and how those of us who do political risk for a living must be thinking as the planet weathers this latest, fearful, plague.

  • Dr. John C. Hulsman is the president and managing partner of John C. Hulsman Enterprises, a prominent global political risk consulting firm. He is also senior columnist for City AM, the newspaper of the City of London. He can be contacted via www.chartwellspeakers.com.
Disclaimer: Views expressed by writers in this section are their own and do not necessarily reflect Arab News' point-of-view

GCC citizens temporarily banned from entering Saudi Arabia’s Makkah and Madinah

Muslim pilgrims wear masks at the Grand Mosque in Saudi Arabia's holy city of Makkah on Feb. 28, 2020. (AFP)
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Updated 29 February 2020

GCC citizens temporarily banned from entering Saudi Arabia’s Makkah and Madinah

  • The decision was made in light of the rising number of coronavirus cases in some GCC countries
  • Suspension for individuals seeking to perform Umrah pilgrimage in Makkah or visit the Prophet’s Mosque

RIYADH: Citizens of Gulf Cooperation Council (GCC) countries have been temporarily banned from entering Saudi Arabia’s holy cities Makkah and Madinah, the Kingdom’s foreign ministry said in a statement on Friday.
The decision was made in light of the rising number of coronavirus cases in some GCC countries like Kuwait and Bahrain, which have 45 and 36 reported cases respectively.
GCC citizens who have been in Saudi Arabia for 14 continuous days and have not displayed symptoms of coronavirus are exempt from the ban, and can obtain a permit from the Ministry of Hajj and Umrah’s website should they wish to perform Umrah and visit the Prophet’s mosque in Madinah.

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On Thursday, the Kingdom temporarily suspended entry for individuals seeking to perform the Umrah pilgrimage in Makkah or visit the Prophet’s Mosque in Madinah, as well as tourists traveling from countries where coronavirus poses a risk as determined by the Kingdom’s health authorities.
These countries include China, Italy, Japan, South Korea and Kazakhstan.


Saudi Arabia confirms 154 new coronavirus cases

Updated 53 min 33 sec ago

Saudi Arabia confirms 154 new coronavirus cases

  • Sixteen of the new cases had come from abroad
  • Saudi Arabia has announced free treatment to all COVID-19 patients in both government and private health facilities

JEDDAH: Saudi Health Ministry spokesman Dr. Mohammed Al-Abd Al-Aly on Monday confirmed 154 new cases of the coronavirus disease (COVID-19) in the Kingdom. Sixteen of the new cases had come from abroad.

“Since their entry into Saudi Arabia, they have been placed in quarantine,” said Al-Aly at the daily press conference held to announce updates on COVID-19 in the Kingdom.

Saudi Arabia announced free treatment to all COVID-19 patients in both government and private health facilities in the Kingdom.

Health Minister Dr. Tawfiq Al-Rabiah announced the royal order and said it included citizens, residents and those in violation of residency laws.

Al-Aly said: “This gesture is undoubtedly — as the health minister stressed — customary in this country. It is a very important humanitarian step. It adds to all the previous steps that the country has taken to give this community the highest levels of protection and health security.”

Al-Aly provided a breakdown of the latest cases. The majority were recorded in Makkah, with 40 cases, followed by Dammam (34), Riyadh (22) and Madinah (22). Jeddah, Hofuf, Khobar, Qatif and Taif all recorded a low number of cases.

Tabuk, Buraidah, Yanbu, Al-Ras, Khamis Mushait, Dhahran, Samtah and Al-Duwadimi reported one case each.

“This brings the total number of registered cases of coronavirus in the Kingdom to 1,453. Most of the patients are in a stable condition and are showing uplifting results,” Al-Aly said.

He said 22 cases are still receiving intensive care, given their critical health conditions. “No additional deaths were recorded and 49 additional cases were treated, bringing the total number of recovering cases to 115,” he added.

The number of reported COVID-19 cases worldwide has reached 734,000. Around 34,000 people have died; 152,000 have recovered.

Ministry of Interior spokesman Talal Al-Shalhoub said that a number of neighborhoods in Makkah will be isolated as a further precautionary measure.

He said the restriction was introduced to limit the spread of the virus in the Kingdom and to preserve the health and safety of citizens and residents.

Al-Shalhoub said the isolation measures would be implemented in Ajyad, Masafi,Misfalah, Al-Hujun, Al-Nakkasa and Hosh Bakr.

He added that the restrictions will be “preventing entry or exit … and preventing touring throughout the day for 24 hours, from 3 p.m. as of March 30 until further notice.”

Residents of the selected Makkah neighborhoods will be allowed to leave their homes for necessities such as health care and groceries “within the scope of the isolation between 6 a.m. to 3 p.m.”

The ministry said that all activities that have been allowed during curfew hours should be carried out in the strictest limits and in accordance with the procedures and controls determined by the concerned authority.

Saudi intensive care unit resident Moayad Qashqari encouraged all residents to seek medical attention if they experience any symptoms.

Commenting on the royal order, he said: “This is a call for all residents in our country; whether they are residence violators or those whose residency has expired. The hospital doors are opened for them, they will not be rejected if their residency has expired.”

He added: “They will be provided with treatment to go home fully recovered. All residents must take this step to look after their health and the well-being of their families. If it isn’t fatal to one person, it could be fatal to someone else.

“We advise everyone to be cooperative and take responsibility.”
 

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