UAE covid 19
How soon a turnaround happens for the UAE economy depends to a large extent on the scale of stimulus packages being offered. Image Credit: AFP

You can almost hear the irony dripping as the echoes of comments reverberate throughout the ecosystem. The nation that led the data revolution and invented the job title of data analyst - the US - is, at this critical moment in history, without data.

Meanwhile, the stimulus package that has been passed is not so much a stimulus as it is disaster relief, where the government is borrowing money in order to compel people to shut down their businesses. This is a case of an induced coma, where nobody is sure of what happens on the other side, when the patient awakes.

As measure after measure is enacted throughout the world to jolt the economy awake, even as we fight the invisible enemy, here is what we do know. Panics feed off themselves and make any situation worse. As default risks start to spiral, the nightmare scenario throughout the banking sector is a wave of mortgage and loan defaults.

There is a simple (even simplistic) solution to this, which is a three-month holiday on all personal, business and mortgage loans. This will provide breathing space for individuals and corporations alike, as they start to think about what the demand curve looks like when the “lights do come back on”.

Furthermore, even as relief measures extend to the private sector, risk appetite will start to revive in the form of acquisition of assets and businesses. This will start slowly and in the areas that show the greatest upside in the current crisis (healthcare space) but look for it to spread to other areas as confidence slowly starts to return.

Let the funds flow

Nobody quite knows how this will play out, as industry after industry has been shut down because of government fiat. But already we are seeing that “cost benefit” analyses that now indicate the impact of this shut down and what the potential moves will be as the economy starts to come back onstream.

These quantitative analyses may seem callous to many, but hard-headed analysis is the only tool that we have to navigate this landscape. There is already talk about moral hazards throughout the world about nationalizing various industries, including the retail and restaurant sector.

But the real moral hazard lies in the fact that politicians all too often don’t want to come across as cruel and therefore do not properly advise their residents for what to brace for. Central banks throughout the world will have to effectively play the role of commercial banks as they seek to appease a panicked population.

And as data from the virus becomes more transparent, we will see panic levels start to abate. We know from past pandemics that most people have the sense not to pay attention to the noise that unnecessarily seek to heighten panic levels. Even at the medical level, we will see more freelancing from doctors that will probably come up with a cure faster than what people are expecting.

Get the money to work immediately

Immediate measures are the most impactful in any discourse, and in the economic framework even more so, such that we fight back against the “panic pandemic”. Expect more measures to be enacted on the economic front by the UAE leadership to add to the measures that have already been taken.

As for the irony of the US being unable to generate relevant data in this critical time, expect the baton to be passed on to other parts of the world that have taken far more courageous decisions in the fight against not only the virus, but also in the economic fallout that was resulted by the effective “mothballing” of economies.

As we look for further disaster relief, the idea will always be to get the economy and therefore people moving again. Academics may have the luxury of waxing eloquent about what industry has changed and what the long-term impact of all this will be, but practical measures will move to the fore.

This battle needs to be fought one day at a time, and countries like the UAE can show courageous economic leadership even as some others succumb by not even knowing how to “hit the ocean from the beach” to paraphrase a basketball phrase.

On the economic front, what we know is this. There have been panics before, and each time they have appeared insurmountable. Each time the UAE has persevered and prevailed.

This battle needs to be fought one day at a time

- Sameer Lakhani of Global Capital Partners

Damage from the virus on the economic front will continue for many months but the leadership and the community is now mobilizing against it. Don’t bet against success.

- Sameer Lakhani is Managing Director at Global Capital Partners.