Tag: crisis

Protests Rage On in Lebanon

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The Lebanese pound has lost a quarter of its value over two days and unemployment soars as the Lebanese become increasingly destitute, prompting another night of angry protests.

Protests rage

Angry protesters blocked roads across the country, with burning tires sending pitch black smoke into the night’s skies. What the protests lacked in size, relative to some of the mass demonstrations seen before the pandemic, they made up in intensity, hurling stones and fireworks at police who responded with tear gas and rubber bullets.

An announcement by the Lebanese central bank that it would inject more foreign currency into its market to stop the free-fall of the Lebanese Pound did anything but calm tempers. The Lebanese are exasperated by what they see as inefficient amateurism in government. Protesters appear to have little faith in their government’s ability to find a solution in coming talks with the International Monetary Fund (IMF).

Comprehensive reforms

Banks were a major target with several branches damaged or set alight as the Lebanese have few avenues left to convert righteous indignation into positive change for the country. The government of Hassian Diab is coming under increasing pressure as its promises of rapid reforms are yet to materialize.

Fears exist that the coming negotiations with the IMF will bring the painful austerity that usually accompanies assistance provided by the neoliberal institute. A Bloomberg reporter on June 4 asked the IMF, “In Lebanon it’s said that the IMF is asking to decrease government expenditures, will these costs of reforms fall on the poorest?” This prompted the IMF’s Communication Director, Gerry Rice, to vaguely emphasize the importance of “the right diagnostic and the right set of comprehensive reforms.”

Looming sanctions

The Lebanese appear to be completely justified in their frustration as further economic woes are on the horizon, a tie purposely made by a foreign actor. The US “Caesar Act,” a package of sanctions on Lebanon’s northern neighbor Syria, is about to destroy a large part of the country’s remaining international trade.

The sanctions are intended to cripple Hezbollah and perceived Iranian influence in the region, but they do so by attempting to impoverish the local population into revolt. For both Syria and Lebanon, trade with their neighbor has provided a fragile lifeline as both countries face a currency in free-fall that resulted in skyrocketing prices for basic necessities and food.

With few positives to look forward to and any optimism drained by an inefficient government, the Lebanese protests are set to continue as the people voice their exasperation with an increasingly worrying collapse of Lebanon’s future prospects.

IIF: Gulf Countries Facing Historic Economic Crisis

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The six nations that comprise the Gulf Cooperation Council (GCC) are facing heavy impacts from the coronavirus pandemic and a drop in oil prices amid a sudden demand slump. Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates are in for a difficult period according to the International Institute for Finance (IIF), a global association of financial institutions.

The Institute had already announced that emerging markets are facing an “unparalleled sudden stop,” with capital leaving the economies of developing nations at never-before-seen rates. Capital is flowing from emerging markets to developed ones at over five times the rate at the worst point of the 2008 global financial crisis.

Triple threat

For the six GCC countries, local economies are suffering from a trifecta of bad news. Capital flows are moving to developed nations and oil revenues have cratered while tourism, hospitality, retail, and travel sectors are all facing unprecedented difficulties due to stringent COVID-19 measures.

Despite the overall relatively successful containment of the coronavirus, GCC countries are set to see a contraction in real gross domestic product (GDP) of 4.4% according to IIF predictions. The World Bank in 2019 had predicted GDP growth between 1% and 4% for most GCC countries, an improvement over the previous year. Oman was considered one of the Council’s members most likely to grow, with an increase estimated at 3.7% due to increased natural gas production.

Oil revenue and state budgets

But the coronavirus and an international “war” over oil prices means the region is now in for a contraction in GDP. The IIF is cheering on unpopular austerity measures as a means to stop deficits from growing as cuts in public spending “could more than offset losses stemming from reduced oil exports.” Even with unpopular and painful spending cuts, the Gulf Council’s aggregate deficits are expected to increase to 10.3% of GDP.

Oman, which the World Bank touted as the GCC country most likely to grow significantly in 2020, is now considered “an increasingly vulnerable spot in the region in light of its mounting debt.” The country could face an economic contraction of 5.3% while its deficit is likely to widen to 16.1%, according to the IIF.

Opportunity to reform?

The crisis also poses an opportunity to build up resilience according to Alain Bejjani, CEO of Emirati retail operator Majid al Futtaim. “In the coming two to three years, we’re going to see, certainly, a very, very large impact that’s going to be asymmetric, depending on the readiness of countries,” Bejjani told CNBC on May 5.

“I think this is a golden opportunity to really change, to reform and to transform our economies into more resilient economies that have (the) ability to bounce back faster,” Bejjani stated. The current crisis could easily accelate reforms and diversification that have resulted in broader opportunities and even improved conditions for women in GCC countries.

Emirates Predicts Tough Recovery as Airlines Struggle

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“I think probably by the year 2022/23, 2023/24 we will see things coming back to some degree of normality,” Tim Clark, Emirates Airlines’ departing president said in an interview with John Strickland. The Dubai-based airline is going through its most difficult time in its 35-year history, according to the airline itself as it faces painful cuts in staff amid evaporated demand.

Airlines crash

An effective and widely distributed vaccine remains the only hope for Emirates as it faces the same issues as airlines worldwide. Enforcing social distancing on airplanes would be economically impossible according to Clark, which leaves only the mandating of masks and gloves for all passengers as feasible COVID-19 preventive measures.

Emirates is facing the same turbulent market as its competitors as passenger numbers have fallen drastically. Current US flights account for only 9.7% of the usual passenger numbers and most international flights globally are limited to repatriation journeys. The airline industry faces historic insecurity as much still remains unclear about the near future.

Mass layoffs

All airlines have made drastic cuts to their staff numbers. In the US, the airline industry’s multi-billion dollar bailout package barred layoffs. On October 1 the ban will expire and US airlines are expected to cut one third of all jobs in the sector.

“We have a lot of cash today, but we burned through about almost a billion dollars in the month of April as an example,” Southwest CEO Gary Kelly told CNN. “So you do the math in your head and you just can’t survive that way.”

Prices of planes drop

Before the crisis the world’s two airplane manufacturers enjoyed the fruits of their de-facto monopoly. Long waiting lists and outstanding orders meant that even Boeing’s 737 Max scandal posed little risk to the two industry giants.

But in the midst of a severe slump in passenger demand, airlines are no longer clambering for new aircraft which is causing lower prices for planes and a waning of the dominance that Airbus and Boeing have exerted over their customers for decades.

Long-haul plans

Before the COVID-19 pandemic hit the industry, many airlines were experimenting with extreme long-haul flights. Australian airline Qantas in November tested a 19-hour flight from London to Sydney in an effort to bypass transit hubs such as Dubai or Doha. Airlines had seen the plans as the “last frontier,” according to Qantas CEO Alan Joyce.

But the plans have now been shelved. Joyce announced in May that Qantas postponed the plans indefinitely. “The time is not right now,” the CEO told reporters. For transit hubs that function as a link between shorter flights, like those in the UAE and Qatar, the shift in trends could mean their flagship airports continue to be relevant for the foreseeable future.

The industry has put its hopes in a rapidly developed vaccine. Emirates CEO Tim Clark is counting on some recovery in 2021 on the back of a “widely available vaccine,” although he claimed that Emirates does not expect to return to “some degree of normality” until the year of 2022/23 or 2023/24. If or when a vaccine becomes a reality, Emirates could see a quick recovery, but that hope depends on a yet non-existing solution over which the airline industry has no control.

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