Ahmed Abu-Sharkh, Country Senior Partner, KPMG in Qatar
KPMG in Qatar is optimistic that Qatar’s COVID-19 cases will stabilise by late summer and expects business to start opening after a phased easing of the shutdown. “While Qatar has been impacted by the new coronavirus, it seems to be weathering the storm better than many other countries. The rate of infection in the country is similar to Germany and the UK, but this has so far not been translated into a high mortality rate, which means Qatar is effectively combating the pandemic”, Ahmed Abu-Sharkh, Country Senior Partner, KPMG in Qatar said.
Speaking Exclusively to The Peninsula, on the `potential impact of COVID-19 on the Qatar economy’, Abu-Sharkh noted there are at least three key factors that contributed to Qatar’s relatively better outcome in terms of combating the pandemic; including its strict enforcement of social distancing, its young population and a capable healthcare system. “It is up to the Supreme Committee for Crisis Management, in consultation with the government, to take a decision on fully lifting the restrictions. But our prediction is that infection cases will stabilise within three months and life will start to get back to normal in another three months,” AbuSharkh said. Qatar’s economy is showing signs of being able to come through the crisis positively.
This is partly due to limited presence of external investors and a QR10bn government backstop for the stock market. The government also offered a stimulus package of QR75bn to assist small business and hard-hit sectors. The recent upgrade by Moody’s of Qatar’s rating to `Aa3` with a `stable` outlook in April 15 is also a sign of resilient economy. KPMG in Qatar believes the major beneficiaries of Qatar’s stimulus package will be the SMEs. “The most vulnerable are the SMEs as they will be the fastest to run out of cash in the current environment.
Stimulus package should have a major impact on them. Retail, auto, services, hospitality, entertainment are the most affected and hence should be significant beneficiaries”, Abu-Sharkh said. Banks have benefitted, indirectly, through disbursing the loans/stimulus packages that are guaranteed by the government. Banks have also gotten some relief from payments being deferred and therefore not recognizing non-performing loans, which may arise from the short term disruption caused by COVID-19.
On the plunge in oil prices, Abu-Sharkh said the US authorities have to take a hard look at the trading behavior in their markets which led to collapse of WTI price. “The oil that is being produced is facing a severe storage shortage worldwide. Even though Opec had agreed for a reduction on 9.7million barrels per day in May production, the demand destruction which has happened in the last two months, and which is expected to continue for the next 2 quarters at least, will not see Crude prices go anywhere beyond $20-25 in my view.” If the world starts to stabilize substantially by July, which is still a very optimistic view, we will see a price in the region of $30-25 by Q4.
“If the current situation continues for next three months, in terms of demand destruction and storage issues, then we could see a trend of $10-$15 by the third quarter,” Abu-Sharkh said. Abu-Sharkh said the postCOVID-19 will change the way we live and do businesses. “We will witness the `beginning of a new era` in Qatar’s retail landscape.” COVID-19 will have a deep impact on consumers’ behaviour, which is going to be in favour of online retail/e-commerce businesses as a whole, he said.
“We should see several startups in this sector soon, as the online customer base is bound to expand. We expect startups to bring innovative ideas, maximize use of Artificial Intelligence and digital tools available to serve the changing customer’s needs.
