“The crisis will be transformational. Many of the jobs destroyed by the crisis will likely not return,” said Vitor Gaspar, IMF director of fiscal affairs department, and Gita Gopinath, economic counsellor and director of research department, in their latest blog.
They said among those businesses that may “permanently shrink” will be those in air travel, but companies in the digital space could further expand and offer new jobs. It is, therefore, important that the unemployed will get the necessary support so that they can shift to other industries.
“It will be necessary to facilitate the transfer of resources from sectors that may permanently shrink, such as air travel, to sectors that will be expanding, such as digital services,” the authors said.
“Support should move from maintaining jobs to supporting people as they retrain or relocate across sectors. It will be necessary to distinguish illiquid but solvent firms from insolvent ones,” they added.
Governments in the UAE and around the world have been proactive in extending emergency assistance to struggling businesses. Dubai announced on Saturday a third round of economic stimulus package worth 1.5 billion UAE dirhams ($410 million), bringing the total relief extended to entrepreneurs to 6.3 billion dirhams.
However, the IMF suggested that governments might need to take further steps, such as using convertible bonds and injecting equity into, or even temporarily nationalizing strategic and systemic firms.
“Many countries will also need to take swift and determined actions to improve legal mechanisms for resolving debt overhang and preventing long-run economic scarring,” the IMF added.
The Gulf Cooperation Council (GCC) region is currently in recession as the tight restrictions earlier imposed to stem the spread of infections and massive fall in consumer demand in various industries hit businesses. As a result, job losses in the UAE could hit 900,000 and 1.7 million in Saudi Arabia, according to Oxford Economics.
The most vulnerable to unemployment are the expatriate workers across the region who don’t have the social safety net and whose ability to stay within the host country is very much dependent on their work visa.
“The burden of job losses will fall on the expat population. Combined with visas depending on employment and lack of a social safety net, an expat exodus is likely as travel restrictions are eased. This could result in the population declining by between 4 percent in Saudi Arabia and Oman and around 10 percent in the UAE and Qatar,” Scott Livermore, chief economist at Oxford Economics Middle East said in a research briefing.
However, the unemployed can find opportunities in other sectors that are currently on an expansion mode. According to a recruitment specialist, vacancies still exist in fast-moving consumer goods (FMCG), e-commerce, finance and information technology (IT) fields.
“The impact of COVID-19 has created clear divisions with some industries and roles seeing a spike in demand, while others are feeling the full effects of lockdown. We have seen government utilities, IT services and FMCG increase their hiring to keep up demand,” Gareth El Mettouri, associated director at Robert Half UAE told Zawya earlier.
(Reporting by Cleofe Maceda; editing by Seban Scaria)
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