As a result of the decline in oil prices due to corona ... a monetary crisis facing Saudi and Emirati companies

The Kingdom of Saudi Arabia and the United Arab Emirates spend tens of billions to support their economies during the Corona crisis and falling oil prices, but reducing state projects reduces the impact, according to a Reuters report.

The report sees that there is a liquidity problem in the two countries, and indicates that experts expected that the budget deficit of Saudi Arabia will reach 22% if the oil price is $ 30, and Standard & Poor's Corporation expects that the budget deficit of the Emirate of Abu Dhabi this year will reach 7.5% compared to 0.3 % in the last year.

Saudi Arabia had suspended a hundred billion project to expand the Great Mosque of Mecca due to the infection of two of the project's employees in the bin Laden company with the Corona virus, according to an internal email seen by Reuters, according to its report.

Two days ago, the Saudi construction giant Bin Laden Group said in an internal memorandum seen by Reuters that two of the project's workers were infected with the Corona virus, and Mobco Civil Construction Company - based in Riyadh - sent a note to employees in Saudi cities such as Riyadh, Mecca and Medina, to inform them that it plans To reduce wages by 25 to 50% due to the unforeseen circumstances caused by the Coronavirus, according to a document dated March 25 seen by Reuters.

A source in a major Gulf contracting company - who declined to be identified because of the sensitivity of the issue related to discussing business plans - told Reuters that he had not seen any new Saudi projects awarded in the past two months.

"There are a lot of concerns, although work on the project we have now has not been suspended," a Saudi contractor, who asked not to be named, told Reuters, expressing his concerns that the state-backed project might be in danger.

He added, "These workers eat, drink and sleep in the same place. If only one is injured, the whole project will stop."

Support and incentives
To mitigate the impact of the Corona Virus outbreak, the Saudi and UAE authorities announced the provision of about $ 70 billion in incentives, and Fitch Ratings said this represented more than 10% of the UAE's GDP and more than 4% of Saudi Arabia's GDP.

The incentive consists of cash and extra-budgetary measures, such as postponing the repayment of loans to afflicted companies and individuals.

But the Reuters report sees that there is a limit to the amount of money that governments - whose income depends on exporting oil - pumped with oil prices falling to its lowest level in 17 years, and the export battle between Riyadh and Moscow exacerbates the impact of the unprecedented decline in demand, as Country governments close their borders to prevent the spread of the virus.

He adds that even the giant government oil companies tightened the belts, as Abu Dhabi and Kuwait companies issued directives to reduce costs, and the Abu Dhabi Energy Department postponed the announcement last week of winning offers to buy a solar power plant, and said it was monitoring energy prices and supply chains.

The agency quoted SABIC CEO and Chairman of the Business Group (B20) Youssef Al-Bunyan as saying that small and medium-sized companies are the most vulnerable to the outbreak of the Corona virus, considering that its impact could extend until 2021, and indicated that they provided support "to help small and medium-sized companies." To keep her job ... so as not to affect jobs. "

Financial flow
The loss of jobs is not a new thing during the Gulf oil crises, as both Saudi Arabia and the UAE witnessed a significant job cut during the recent drop in oil prices in 2015 when government spending was cut.

Bankers said that liquidity is the biggest immediate challenge, as the head of commercial banking services at HSBC Bank for the Middle East and North Africa and Turkey, Daniel Hewlett, stressed that the main thing is to worry about liquidity, and do we have enough cash to trade? According to Reuters.

Mazen Al-Khatib, CEO of "Nostalgia Classic Cars" in Dubai, told Reuters that his company is negotiating a loan to help cover operating costs, but it may still need to make painful decisions, according to the agency.

"I am concerned about the salaries at the end of the month. Many orders were canceled, and many orders that were about to expire were delayed," Khatib added. This statement was supported by CEO of Al-Andalus Real Estate Company - based in Riyadh - Hathal bin Saad Al-Otaibi, who said that the main challenges facing the retail industry are cash flow and loan service.

"It goes without saying that the financial results for the second quarter of 2020 for many companies will reflect the trade challenges for this period," he told Reuters.