The world is now grappling with the Covid-19 pandemic, as almost every country takes drastic measures to prevent its spread. Much of the initial focus has been on medical intervention and social distancing. However, as these dramatic measures take hold, it is important to appreciate the economic gravity in order to stave off a different kind of disaster.
As the disease spreads and as people are forced out of work for weeks and possibly months to “flatten the curve” – reducing the infection rate so hospitals are not overwhelmed – economies are grinding to a halt.
UAE’s response
In the United Arab Emirates, testing centers have been opened all around the country to track and trace infections efficiently, as knowing where infections originated helps authorities prevent further transmissions of the virus. This has already proved effective in flattening the infection curve not just in the UAE, but also in Germany, South Korea and Australia. Nations without this sort of rigorous testing have seen large spikes in infections, leading in turn to more economically suffocating lockdown measures.
Yet testing can only go so far, and as the UAE has discovered, more comprehensive measures are needed to slow infection rates and prevent devastating economic shocks.
The Emirates’ early success may stem from the highest ranks of government being actively involved in health care and economic support. Indeed, Emirati leaders chair virtual meetings to ensure everyone is properly looked after and sectors can function as effectively and safely as possible.
The UAE is one of a handful of nations that have taken firm, decisive action to combat the economic fallout this pandemic will certainly create. The country’s support for small and medium-sized enterprises (SMEs) should prompt the rest of the world to navigate these trying circumstances properly.
Abu Dhabi Crown Prince Mohammed bin Zayed rolled out economic relief in addition to medical and health procedures early on. Abu Dhabi’s Executive Council announced 16 new initiatives designed to support businesses and the community.
These initiatives include providing credit guarantees for SMEs, exemptions on commercial vehicle registration fees, subsidies for electricity for startups, fast-tracking government invoices to get businesses paid more quickly, land leasing reductions, penalties waived, rental rebates for hospitality, tourism, and entertainment sectors, and beneficial lending options, among others.
However, while initiating economic stimulus early on, the backbone of the Emirates’ response to the Covid-19 outbreak is rooted in its comprehensive public health-care system. Testing, hospital treatment and recovery programs are covered by Sheikh Mohammed bin Zayed’s health-care program, and this includes foreigners.
A manageable health-care and economic situation has allowed the UAE to go a step further and provide humanitarian missions to areas outside its own borders – something that the world’s most powerful nations have been unable to perform.
Some are less fortunate
On the other hand, nations suffering both inadequate public health policies and poor economic support are in a particularly vulnerable position.
Italy, for instance, now contends with one of the fastest outbreaks and highest Covid-19 fatality rates in the world – its population is one of the world’s oldest, which is a key factor in its above-average mortality rate from the coronavirus.
Italy, a country whose sluggish economy has failed to gain traction in the past few years, now has even greater hurdles ahead of it, to say nothing of its overburdened health-care systems.
Spain faces a similar situation.
Even in light of these revelations, few countries outside the Middle East have taken the necessary proactive steps to tackle two serious challenges at once: medical care for their citizens and economic stimulus to keep them from financial collapse.
This isn’t the first global pandemic we have had to face. During the 1918 Spanish flu, an estimated 20 million to 50 million people worldwide died from a particularly deadly influenza strain mostly carried around the world by soldiers returning from World War I.
The economic impact of that pandemic was significant, but relatively short-lived when compared with the extensive death toll. The recession back then stemmed mainly from huge wage increases due to worker-supply shortages that left businesses struggling to produce efficiently. Many, just like today, were forced to rely heavily on social security.
If we know the economic distress caused by pandemics, why are some countries not reacting quickly enough and implementing preventive measures to help stabilize their economies?
Central banks throughout the world have sluggishly stepped up to offer stimulus packages in light of restricted travel with most countries prioritizing widespread lockdowns. The goal of these lockdowns has been to limit the strain on health services, but if businesses are not properly supported early on, the long-term economic effects may grow more serious than the virus itself.
Some nations, such as Australia, Canada and the United States, have taken particularly strong first steps to provide fiscal stimulus to their economies. Three of the largest Arab economies have pledged nearly US$47 billion in stimulus as a way to counter the potential and very likely economic harm the pandemic will inflict.
As the world has seen with the UAE, being proactive and anticipating the economic impact of a pandemic is a worthwhile course of action. While the US and others waited, others acted quickly and decisively, recognizing the long-term economic impact shutdowns will have.
It’s time for Italy, Spain and others to follow suit and replicate the examples of the UAE and nations like it to help combat a recession in the wake of this pandemic. They need to invest in stimulus to the shore of the economy, protect their citizens from financial devastation, and ensure health care is as robust as possible.