Despite COVID-19, GCC businesses have opportunities for growth

GCC countries, like other economies in the world, have been hit by the spread of the coronavirus, but the pandemic has also provided exciting growth opportunities for some sectors, a report revealed.

More than 20,000 coronavirus cases have been reported in the GCC so far, as governments urge the public to stay indoors or observe social distancing.

Countries in the GCC have implemented a series of precautionary measures to stem the spread of the virus. A raft of economic stimulus packages, amounting to billions of dollars, have also been unveiled to fight the crisis.

According to the recent analysis by research & consulting firm Frost & Sullivan, COVID-19 could play out in three ways.

In the first, or the scenario of “Gradual Containment”, the outbreak will be largely contained by April, and most economies will be showing signs of industry and economic rebound by May, with full recovery expected by Q4 2020.

In the second, or the scenario of “Severe Pandemic”, the outbreak is not contained to a large extent by April. This scenario is marked by downturns in consumer demand, industrial production and world GDP growth.

In this case, “the possibility of a year-long recession is real with full recovery only by Q3 2021,” Sarwant Singh, Managing Partner & Regional Leader, Frost & Sullivan, Middle East, Africa and South Asia (MEASA) and Global Head – Mobility and Aerospace, Defense & Security Practice said.

The third scenario, or the scenario of “Global Emergency” will be marked by the uncontrolled spread of the pandemic with economies limping back to recovery from Q1 2021, while a full recovery is only expected by Q1 2022.

GCC sectorial impact

The IT sector in the GCC is likely to decline according to the report.

“The pandemic will, however, catalyze unprecedented growth in digital services and technologies that enable digitalization. While most hardware segments will shrink, rising demand for workforce management, collaborative, security, remote access, and productivity tools will energize the enterprise software segment,” Singh said.

Post COVID-19, Big Data, the digitalization of government services and healthcare services and the wider 5G use cases across industries will characterize the IT services sector, the report said.

The food & beverages (F&B) sector has been hit by travel restrictions that followed the spread of the coronavirus, the report said.

According to Frost & Sullivan, the hotels, restaurants & cafes (HORECA) segment, which comprises 30 percent of the GCC’s economy, has been particularly hard hit because roughly 20 percent of its revenues are related to tourism.

Quick-service restaurants (QSRs) and fast-food eateries have also realigned operations to serve only delivery and takeaway orders.

“F&B retail is in flux with disrupted supply chains, consumers bulk-buying long-shelf-life F&B products, and hoarding/panic buying throwing traditional demand projections into disarray,” Singh said.

“The nascent e-commerce industry has received a fillip with new growth opportunities for primary packaging materials manufacture,” he added.

As for healthcare, the sector is expected to experience a short-term decline of about 15 percent to 20 percent in revenues this year according to the report.

The drop is due to a lower consumption caused by delays in elective surgery and lower purchases of medicines due to fewer prescriptions.

Shortages in medical devices like ventilators and test kits and operational issues, including the disruption of clinical trials and inadequate virtual care, will also add to the challenges, Frost & Sullivan said.

“On the positive side, COVID-19 is poised to trigger double-digit growth in telemedicine and virtual care solutions, highlight the need for higher local production of essential drugs and underpin the growing importance of online pharmacies,” Singh said.

For the mobility sector, ongoing uncertainties related to COVID-19 will have a short, sharp impact.

Frost & Sullivan expects the consumer traffic in physical showrooms to dip by 70 percent to 80 percent with an up to 24 percent drop in new car sales in 2020, while demand for vehicle servicing and parts, short-term car rentals and shared mobility services will wane steeply.

“Promisingly, moderate pick-up in GCC new vehicle sales is expected in 2021. This will be reinforced by the fact that the 3.5 million vehicles purchased during the peak years of 2014-2015 will need to be replaced within the next 2-3 years,” Singh said.

“Aftersales will prove resilient as customers move to extend the useful life of their vehicles,” he added.

For the GCC’s transport & logistics sector, sustained infrastructure development and growing segments like e-commerce will moderate the impact of COVID-19, the report said.

“More immediately, the sector will face challenges in the form of supply chain disruption, capacity constraints and cost pressures. However, the crisis will motivate the building of shock-resilient supply chains in food and healthcare logistics while creating greater impetus for supply chain digitization, Singh said.

For the industrial and energy sector, disruptions in material supply and logistics and labor mobility are having a significant impact on the construction segment and projects at the bid evaluation stage and those under execution will be particularly impacted, the report said.

“As the sector regroups, there will be newer and wider applications for automation and digitalization technologies. In addition, autonomous operations in manufacturing, oil exploration, supply-demand assessment, site inspection, and predictive maintenance will pick up pace,” Singh said.

 

Source: https://www.zawya.com/mena/en/business/story/Despite_COVID19_GCC_businesses_have_opportunities_for_growth-ZAWYA20200419101205/

 

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