EXCPR™: THE COMMERCIAL IMPACT OF CORONA VIRUS ON THE KUWAITI ECONOMY

Thursday, February 6, 2020

THE COMMERCIAL IMPACT OF CORONA VIRUS ON THE KUWAITI ECONOMY

THE COMMERCIAL IMPACT OF CORONA VIRUS ON THE

KUWAITI ECONOMY

The Chinese economy has dominated the world over the last 10 years, which has reached second place in the world after US with an estimated size of KD 4.2 trillion, with an annual growth rate of more than 6.2%. Such fast growth of Chinese trades is due to the effective strategy depending on- produce more and competitive price. Perhaps this rapid growth in the size of the Chinese economy has a significant impact on the rest of the world markets. As a result, the Chinese market has surpassed the world's largest economies such as Japan, Germany, India, and even catching up with the US dominated economy.

Corona virus at attaching the most important world’s economy, started on Jan. 2020, which will affect the global trade movement. The epidemic is one of the greatest risks that may cripple trade and economy during the current period, as Wuhan city located in China, is one of the pillars of the Chinese economy, accounting for about 78% of China's export volume to the world's countries. The city, which has been classified as the place of the Corona virus, accounts for about 33% of China GDP. Therefore, the decline in demand for oil and its derivatives because of this economic recession has affected the movement of the oil market and prices around the world, which is expected to exit nearly 3 million barrels from the market - 20% of China's total demand. The impact of Corona on the global technology industry will have an impact on the global technology industry, especially if we know that China alone accounts for about 21% of global IT systems. The impact of the Corona virus on investor confidence in the Shanghai Stock Exchange, from which investments equivalent to KD 130 billion as of the preparation of this report evaporated, with a sharp decline of 9%, the sharpest since the financial meltdown in June 2015. Preliminary results also point to the beginning of the recession within China, thanks to the closure of many retail stores of various global companies in China, thereby increasing unemployment. The virus also has an impact on world tourism, of which the Chinese people make up 150 million people, which will undoubtedly affect transport and hotel traffic around the world.

The impact of this risk on the domestic market in Kuwait is also significant, as The State of Kuwait is heavily dependent on the volume of trade with China. According to the 2019 data, Kuwait's total exports were KD 19.6 billion, of which China accounted for only about 1.7%. While total imports of goods to Kuwait were about 10.1 billion Kuwaiti dinars, Chinese products account edited at about 18.8%, which means that the Kuwaiti market will be affected by these risks if the presence of the Corona virus continues and no solution to this problem is found. As for the value of imports from China to Kuwait, the results indicate that it amounted to about KD 1.9 billion, with an estimated growth rate of about 7.6% year-on-year. The following table shows the volume of exports and imports from/ to the People's Republic of China - to the State of Kuwait.

As described in the above table, Kuwait relies on the Chinese market to export its goods, which are valued at KD 322.7 million, which is one of the most important markets targeting Kuwait to sell its products there. Nevertheless, Kuwait relies on the rest of the world's different markets for the sale of products, particularly oil and its derivatives. The following table shows the most important markets that Kuwait is targeting for the sale of its goods, which may benefit from the presence of this commercial risk - the Corona virus - in increasing the volume of Kuwaiti exports to it:

As for the impact of the Corona virus on goods imported into Kuwait, this will be significant as outlined in this report, with a ratio of up to 18.8% and a value of goods ranging from KD 1.9 billion. The following figure shows the most prominent countries on which The State of Kuwait relies for its various goods, notably the People's Republic of China:

Finally, the economic impact of this virus on Kuwait may continue to lead to the performance of agreements concluded with the People's Republic of China in 2018, which include defense industries, e-commerce, investment promotion, as well as cooperation in the field of communications. On the other hand, Bloomberg estimated the losses of the global economy due to the Corona virus at about 160 billion USD— about 50 billion KD - amid an expected slowdown in global growth for the coming years. Perhaps the alternative to that recession in Chinese markets would be greater activity for one of the world's most promising countries, with India, Japan, South Korea, Brazil, or returning its share to the US. The transition to the continuing corona virus crisis depends on China.