Corona and Its Impact:

COVID-19 pandemic is affecting economies including national and global. Every enterprise is
facing and handling this outbreak in its own way with some losses as well. The most difficult
problems for any enterprise are:
• less demand because of inflation,
• disruptions in supply chain,
• transportation and export issues,
• shortage for supply materials,
• including decrease in revenues.
In this situation, we can clearly see that SMEs (small and medium enterprises) are getting most
affected by this outbreak. Because they have limited resources to run smoothly during such
conditions. Their lack of managerial and financial resources make them vulnerable against such
disruptions that are likely to go longer than expected.(Prasad, Su et al. 2015) Also, due to low
budget, SMEs depends on their daily transactions which are being disrupted nowadays and some
of these firms are about to fire all their employees, and some others are already closed till now.
If we talk about their significance to any country, economists consider them as a backbone for
any economy, because they are major source of employment for all of the world. But now due to
outbreak of COVID-19, small enterprises like manufacturing, trade, retail, and wholesale, etc. in
Oman are facing adverse effects on their business.

How Pandemic Affects SMEs:

As we talk earlier, small and medium enterprises depend heavily on their daily transactions.
They are also highly dependent on cash economy. COVID outbreak hamper the operations of
these type of businesses because of its adverse effects on the economy. Some of the major
problems caused by pandemic are listed below:
• the unavailability of skilled labor and labor mobility restrictions
• productions slowdown
• raw material shortage
• transportations restrictions
• external environment uncertainty
• short run trade off
• slowdown of economy and economy depression (for a country as a whole)

Impact of COVID-19 on the global economy

From February 21 to March 24, 2020, COVID-19 crisis went global. Economists are saying that
this outbreak will have major consequences for GDP growth of all the world (May and Director
2020). It is estimated that global GDP will be affected between 2.3% to 4.8% (Park, Villafuerte et
al. 2020). Additionally, it has also been predicted that the current pandemic outbreak may cause
global foreign direct investment to shrink by 5%–15%. Further, according to the UNCTAD report,
the world needs a support package of up to $2.5 trillion to cope with the damage. Hence, based on
these statistics, the current global crisis will likely be worse than the 2008 crisis (Valensisi 2020).
Further, according to International Labor Organization (ILO), almost 25 million people around the
globe could lose their jobs (loss of workers' income of as much as USD 3.4 trillion). A more recent
report of ILO shows that lockdowns (full or partial) measures are influencing 81% (around 2.7
billion workers) of the total global workers. “It is the worst global crisis since the Second World
War” (Monitor 2020). According to ILO the impact of COVID-19 on the economic output of
accommodation and food services, real estate, wholesale and retail trade, repair of motor vehicles
and motorcycles is ‘high’, while utilities, public administration and defense, social work activities,
human health, and education is ‘low’.
COVID-19 will have a more profound effect in developing countries like Oman that will make it
much more difficult for them to implement effective stimulus without facing binding foreign
exchange constraints. Most vulnerable countries are those that have weak health infrastructure,
heavily dependent on trade and tourism sectors, heavily indebted, and that depend on unstable
capital flows. Controlling the COVID-19 outbreak will revive the economy, but the risk of
continued financial stress is very high even after 2020. Further, it has also been estimated that
poverty is likely to increase by around 11 million people. Although the economic impact of the
outbreak is continuing and is increasingly unpredictable, it is clear that the situation in developing
economies will get worse before it gets better. According to the United Nations Development
Programme (UNDP), income losses in developing countries are likely to exceed $220 billion. In
addition, World Bank in its recent report has predicted that Asia could face its worst economic
performance in 40 years with half of the countries falling into a deep recession. This is the case,
particularly for Oman.

Impact of COVID-19 on SMEs in Oman

Small and Medium Enterprises is increased at the rate of 11.4% in Oman between the year and the
previous year despite CPVID 19. At the end of June 2020, 44,448 small and medium businesses
are registered in the public authority for small and medium enterprises development, growing by
11.7% compared to the same period of 2019. According to the data issued by the NCSI (National
Centre for Statistics and information). Among the governates. Muscat outdone the list with the
34% small and medium enterprises register till April 2020, followed by North Al Batinah 16%,
A’Dakhiliyah 13%, Dhofar 8%, and the rest of the governates with 29%.

COVID-19 Country (Oman) Response

The Ministry of Health, Oman stresses that all citizens and residents should seek information from
the official sources and communicate with the Ministry through the call center (24441999) in case
of any inquiry.
Travel restrictions
Following the current situation of this outbreak and in collaboration with the World Health
Organization (WHO), the Ministry of Health, Oman has undertaken precautionary measures
addressing the surveillance, investigation of suspected cases, and increasing awareness among
travelers from and to China.

Import & export restrictions

In view of the current conditions of the spread of Corona virus (Covid 19)- the Directorate General
of Customs, Oman launches a number of electronic customs facilities and services.

Economic recovery plan

On 18 March 2020, the Central Bank of Oman (CBO) announced a comprehensive incentive
package to inject additional liquidity of more than OMR 8 billion (USD 20.78 billion) into the
economy. Key measures announced as part of the package include:
• Lower capital conservation buffers by 50%, from 2.5% to 1.25%
• Increase the lending ratio/financing ratio by 5%, from 87.5% to 92.5%, on the condition
that this additional scope be reserved for lending to productive sectors of the economy,
including the healthcare sector
• Accept requests for deferment of loans/interest (profit for Islamic financial institutions) for
affected borrowers, particularly SMEs, with immediate effect for the coming six months
without adversely impacting the risk classification of such loans
• Defer the risk classification of loans pertaining to government projects for a period of six
months
• Local banks to consider reducing existing fees for various banking services and avoid
introducing new fees in 2020
• Reduce the interest rate on repo operations by 75 basis points, to 0.50%, and increase the
tenor of repo operations up to a maximum of three months
• Decrease interest rate on discounting of government treasury bills by 100 basis points, to
1.00%
• Reduce the interest rate on foreign currency swap operations by 50 basis points and
increase in the tenor of swap facility up to a maximum period of six months
• Lower the interest rate on rediscounting of a bill of exchange and promissory note (with
two signatures) by 100 basis points, to 3%
References

May, B. and G. M. J. E. O. Director (2020). "World Economic Prospects Monthly." 42: 1-29.

Monitor, I. J. G. I. (2020). "COVID-19 and the world of work."

Park, C.-Y., et al. (2020). "Updated Assessment of the Potential Economic Impact of COVID-
19."

Prasad, S., et al. (2015). "Building disaster‐resilient micro enterprises in the developing world."
39(3): 447-466.

Valensisi, G. J. T. E. J. o. D. R. (2020). "COVID-19 and global poverty: Are LDCs being left
behind?": 1-23.