Blockade prepared Qatar for coronavirus, says QF professor

The global supply chain is experiencing a total disruption as the coronavirus continues to spread to more than 90 countries. How well countries cope with the economic consequences, said Professor Alexis Antoniades, Associate Professor and Director of International Economics at Georgetown University in Qatar, will be determined by the strategies that are already in place to mitigate supply chain risks.

“Countries that rely heavily on raw material from China will be affected the most, while countries that have diversified sources will not suffer as much. But supply chain disruptions are not the only concerns for countries. Countries that have weak healthcare infrastructure, rely heavily on tourism, and our not financially able to undertake significant fiscal stimulus will be hit hard,” Professor Antoniades said.

With Qatar becoming increasingly self-reliant in response to the blockade, it now manufactures many products that it previously didn’t. And as panic buying takes over, with shelf after shelf of disinfectant and hand sanitizer emptied by residents concerned about the threat of infection, local production will serve to calm many of the fears.

“In more ways than one, the blockade has been a blessing in disguise,” said Dr. Antoniades, a professor at the QF partner university, and a twelve-year veteran of the Qatar economy. “In less than three years since the launch of the Gulf Crisis, the nation’s manufacturing sector has boomed. Last week we were out of hand sanitizer, but now shops are fully stocked with locally produced bottles. That’s the impact of ‘made in Qatar’.”

Given the current coronavirus outlook, public trust in governments and institutions in handling major crises will serve as a major driver of public perceptions and reactions. Broad government reassurances will need the backing of concrete measures and a foundation of trust to guide the country through the unfolding crisis.

“I think Qatar has done an excellent job in dealing with coronavirus. First, they are inspiring confidence through reassuring messages and actions. They are transparent, decisive in their actions, clear, and quick to act.

“This was also the strategy when the blockade hit the country. Qatar made the best out of it, shielding the nation from the effects of the blockade, in the short term, while putting into place a strategy for protective long-term measures. For most people, life felt normal. So today, when the State says: Don't worry, we're on top of it; the public can believe it. That confidence is key in helping prevent panic and dealing with the developments.”

In particular, Professor Antoniades notes that Qatar’s move to evacuate residents and citizens from Iran using private charter planes was a strategic decision. “The State was very smart. They sent private planes to evacuate people in a controlled exercise that minimized the spread of the virus in an uncontrolled fashion. That was a very successful effort.”

And while Qatar takes part in the global effort to contain the virus, it also shares in the global economic toll of the slowing economy, which continues to head into a recession. With an economic dependency on hydrocarbons – it receives a large part of revenue by selling Liquefied Natural Gas (LNG) – Qatar is also impacted by the drop in the LNG market, according to Professor Antoniades.

“Qatar is very much part of the globalized economy, which relies heavily on people and material moving in and out of the country – and that has been disrupted. Yes, Qatar produces its own goods, but the production of many final goods still depends on raw material, most of which, come from Asia. There is a big concern there.”

Nearly all industries have been affected by the virus, with the travel and tourism sector taking a larger hit than most. However, the question remains as to whether any industry stands to benefit from the virus and the associated repercussions.

Professor Antoniades believes there is no real winner. “I don't see how industries can benefit but I think there are some individual companies that can benefit. For example, if you are the maker of Clorox, this is a good time for your company.”

With social distancing an important measure for slowing the transmission of the virus, he adds, streaming service companies will also see a boost. “For people too concerned to go to a crowded cinema to watch a movie, Netflix will be the way to go. It would not be surprising if such companies benefit, as a result.”

Traders around the world are bracing for uncertainty and a bear market, as financial fallout from the coronavirus continues and investors seek to stave off mounting losses. “People may think that playing it safe means getting out of the market, so, you will see a lot of selling in the market.”

The result of that mounting panic, said Dr. Antoniades, is already playing out, with over-consumption of commodities like toilet paper, masks, sanitizers, and other goods. “I think there's still a lot of uncertainty,” he said. “People are trying to be better prepared for what comes next.”