Friday, June 12, 2020

Qatar Coronavirus Updates (and Economy Update)



I have now found out that the Ehteraz app is indeed a proximity detector. Yesterday I received this message on my phone:


So it appears that someone in my building had contact with a confirmed case so they are self-quarantining (if the person had tested positive they would be at a quarantine center). I was in my apartment so I was not at risk from whomever this was. So the good news is the proximity detector works, the bad news is that because it is someone in my building I am now receiving this message numerous times, today I got it four times so far.

As for the virus, cases are still well over 1,000 a day, today it was 1,500+ but recoveries are now outpacing the new cases most days. There are still over 200 people in ICU and everyday deaths are being reported, although today it was only one. Seventy people have died so far from the virus. On the 15th phase 1 of lifting restrictions occurs but it is not a significant lifting (thankfully). Many mosques will reopen but limit the number of worshippers. I spoke to some friends today and none are planning to attend mosques yet, they will continue to pray at home for the next while.


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The economic downturn caused by the virus and the oil price crash has led the Qatari Government to announce a dramatic change. Ministries, other Government organizations, and entities sponsored by the Government, must slash 30% of expat staff costs effective immediately. It can be salary cuts, layoffs, a mixture of both, it doesn't matter how the 30% reduction is accomplished but it must be done. Qataris will be fine of course, though some Government benefits, such as paying out excess vacation time, will cease for Qataris as well so even citizens will face some impacts.

While this news is perhaps not too surprising, countries like Saudi Arabia recently enacted economic measures like sales tax increases (from 5% to 15%) and removing some worker benefits, this is the first all-around cut by the Qatar Government focusing on expat workers. There are also layoffs in the private sector, announced by companies such as Qatar Airways (~9,000 employees). The oil industry will also surely be laying off people, how many is hard to predict.

The impact will be significant and it will take some time for the economy to adjust. There will be the immediate impact of layoffs but it is the knock-on effect that will be hard to gauge: the already softening rental market will take a hit, private schools will face huge uncertainty regarding enrollment in September, workers who have their pay cut might search for another job and leave when they find one, and consumer spending will definitely take a hit just as the retail sector is gearing up to reopen. Based on experience with the previous oil price crash in 2014 large and expensive goods will face the biggest hit -- no one will buy a new car or furniture if they are uncertain about their job (or took a big pay cut), and bankers are definitely going to be worried about the bank's personal loans and whether people will be able to repay them. Rental housing/apartment construction will likely grind to a near-halt, which means layoffs in the construction sector in the next 3-12 months. So the economy will take time to re-adjust to the new post-lockdown reality.

The oil price is not going to rebound anytime soon and current prices of $35-40 a barrel is not enough to balance the Government's budget, so the cuts are here to stay. It is just a matter of how the economy reacts over the next year. I imagine that other Governments in the Gulf will be watching closely and may implement similar cuts, Kuwait in particular has faced a lot of calls internally to cut the expat workforce in the country.


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