Staying indoors

BUSINESSSUNDAY 22 MARCH 2020

MOHAMMAD SHOEB THE PENINSULA

Most of the online food and retail outlets in Qatar which offer home-delivery services for groceries and food items are flooded with orders. The order books of some retailers are so full that they have even put regret messages on their websites as the slots are not available for immediate delivery. Some retail chain groups are working to expand their capacity to serve their customers better.

With the outbreak of Coro-navirus (COVID-19) most of the people in Qatar are working from home as offices, malls, shopping centers, restaurants and other public places and outlets (except those dealing in food and pharmaceutical products) remain shut. People are avoiding to visit even food outlets and ordering essentials online.

One of the leading hyper-markets in Qatar is so flooded

with online orders that it has flashed a message on its website that read: “Due to high demand of orders, slots may be full for your selected day. Please try later. Thank you.”

“As of now we have limited

number of vehicles but working to expand our capacity by at least 25 percent on urgent basis. We have option of using third party services but we do not compromise with safety con-cerns. All our vehicles are fully equipped with refriger-ation facilities to carry chilled, frozen and other normal items that do not require refrig-eration facilities,” Muhammad Shahnawaz, Regional Director of Lulu Hypermarket in Qatar and Middle East, told The Peninsula, yesterday.

“We started the home-delivery services nearly a year ago. This sudden surge in demand for the service is obviously due to the virus. But we do not intend to use the home-delivery services offered by third-parties like courier and postal service companies. We have a policy not to rely on others due to safety concerns. So we are expanding our own staff and other needful resources and facilities as quickly as possible to ensure

that we do not have to com-promise on quality. However, we remain committed to serve our customers better and expanding the capacity on pri-ority basis.” Shahnawaz added.

A message posted by Lulu on its website, read: “Thank you for patronizing Lulu online shopping and for showing patience to get your deliveries. We are doing our best to serve you all, however, due to upsurge of orders, you may find it dif-ficult to access your preferred slot.

We humbly request you to order for the available slot and rest assured that we will reach out to you as urgently as pos-sible with utmost diligence. Lulu is always committed to serve you, and you cooperation is our strength. “

A regular customer of Lulu Hypermarket said that online orders for groceries are full. There are no slots available before March 25, 2020. “My kids do not like any other bread except made by Lulu’s in-house

bakery. So will have to go to buy it in person,” said A Saad, an Indian living in Qatar for more than 20 years.

Another Indian expatriate said: “I have two little kids at home. My wife is not well. In such a situation I cannot afford to take the risk and go out even for essential shopping at this situation. So online delivery of groceries is of great impor-tance, especially for people like me.”

He added: “We are blessed that in Qatar such facilities are now available which is great and timely help for us. Many items such as perishable goods

like vegetables, bread, dairy and poultry products need to be bought frequently, which can now be purchased online and being delivered at door step. It’s a big and timely services that too without any extra charge.”

In addition to Lulu, other retailers such as Car-refour, New Indian Super-market, Retail Market, are also offering online services. The mobile app Fingertips, also offers home-delivery services for food and other grocery items within 75 minutes, at a minimum order of QR35.

Online delivery platforms in Qatar struggle to meet surging demands

COVID-19 and oil shock will magnify weakness in 2020 sovereign outlookTHE PENINSULA — DOHA

The coronavirus outbreak and the related oil price shock will lower sovereigns’ economic and fiscal strength, increase weaker sovereigns’ vulnera-bility to shifts in sentiment and expose weaknesses in domestic and international institutions, Moody’s Investors Service said yesterday.

As with other sectors, Moody’s will adjust ratings to reflect changes in credit risks profiles that the rating agency considers to be unlikely to fully recover within the next few years, and those with higher default risk.

Moody’s currently assumes that the crisis, however severe, will be relatively short-lived and that growth will resume in the second half of the year. In that scenario, given their par-ticular credit strengths, the rating implications of the crisis for global sovereigns are likely to be relatively limited.

“Sovereigns can weather storms others cannot,” said Sarah Carlson, a Moody’s Senior Vice President and the report’s co-author. “Generally speaking, they have deep pockets, wide sources of revenues and funding, often including sup-portive banking systems, and the unique ability to determine which expenditure obligations they meet without sanction.”

Hence, for now at least, material credit and rating con-sequences are expected to be focused on weaker sovereigns or on those facing idiosyncratic challenges, probably relating to weak institutions or inef-fective policymaking.

“That said, our assumptions about the impact of the crisis are dynamic and could change. If damage to growth were to be more severe and protracted, with debt rising rapidly and access to affordable financing reduced, the credit implications for sovereigns would be more profound,” Carlson added.

The Nasdaq building is seen at the Times Square in New York City, yesterday. Governor Andrew Cuomo urged New Yorkers to stay indoors as much as possible and ordering all non-essential businesses to keep their workers home as the number of confirmed coronavirus cases in the state reached almost 8,000.

Germany preparing

supplementary

budget of €150bn

REUTERS — FRANKFURT

German Finance Minister Olaf Scholz (pictured) said yesterday that the government was readying a supplementary budget of €150bn ($160bn), as part of a broader funding package to tackle the economic impact of the coronavirus outbreak.

“A hundred and fifty billion is a large amount, but it gives us the flexibility that we now need,” Scholz said. “In addition we are laying the ground for various other institutions of our nation to take the steps necessary to stabilise our companies... it’s important to send a clear and strong signal right at the beginning,” told a news briefing.

One of the leading hyper-markets in Qatar is so flooded with online orders that it has flashed a message on its website that read: “Due to high demand of orders, slots may be full for your selected day. Please try later. Thank you.”

One of the

19SUNDAY 22 MARCH 2020 BUSINESS

The epidemic outbreak has brought about challenges to global logistics. With the help of eWTP, we’re trying our best to ensure speedy transport and delivery to move the supplies to remote communities where they are most needed.

Juntao Song, Secretary-General of eWTP

Qatar banks’ public sector loans rise to QR338bn, deposits at QR279.9bnTHE PENINSULA — DOHA

The total assets (and liabilities) of Qatar’s commercial banks reached QR1,566.2bn in February 2020, an increase of about QR5.4bn from the previous month.

The assets consist of credit facilities, debt securities, bonds, sukuk, bank balances and investments in branches. On the other hand, liabilities consist of customer deposits, deposits with other banks, capital accounts, bonds and debentures, and other liabilities.

Al Byraq Center for Eco-nomic and Financial Studies noted in its detailed reading of Qatar Central Bank’s monthly bulletin on banks that Public sector deposits increased by QR1.5bn to QR279.9bn. The total public sector loans from local banks increased by QR6.6bn to QR338bn.

Total domestic private sector deposits with banks increased by QR3.5bn to QR383bn by the end of Feb-ruary from the previous month. The total local loans and cre QRdit facilities provided by banks to the local private sector increased by QR14.2bn to reach the level of QR662.3bn. The credit facilities to the real estate sector increased by QR1.1bn to QR147.5bn. Consumer loans to individuals were up by QR1.2bn to QR138bn. The loans to services sector jumped by QR2.8bn to QR173.6bn and the credit facilities to the trade sector rose by QR2.1bn to QR137.9bn. However, the loans to industrial sector remained unchanged from January.

On the asset side, com-mercial banks’ investments in securities outside Qatar stood at QR19.7bn. Its assets with banks outside Qatar decreased

by about QR18bn to QR75.3bn. Local bank loans to external destinations decreased by about QR0.5bn to the level of QR74.3bn, while local bank investments in foreign com-panies increased by QR0.1 billion to QR58.8, and their other assets abroad decreased by about QR0.2bn to QR3.8bn.

On the liabilities side, deposits of foreign banks with banks inside Qatar decreased by QR12.7bn to QR250.4bn, and local banks’ debt abroad increased in the form of bonds and certificates of deposit by about QR8.5bn to the level of QR70.1bn. The balance of holders of foreign deposits with Qatari banks increased by QR1.6bn to QR216.6bn, and then the total liabilities of the outside world decreased by about QR2.6bn to QR537.6bn.

By matching the assets of the banking sector abroad with those of other liabilities, we find that the net liabilities of the banking sector in Qatar to the outside world have increased by the end of February by about QR16bn to QR305bn, said Bashir Al Kahlout (pictured), Economic Consultant and Director, Al Byraq Center for Economic and Financial Studies.

US Congress resumes talks on $1trn economic rescueAFP — WASHINGTON

The US Congress resumed negotiations yesterday on an emergency economic package that could top $1 trillion to help the country deal with the impact of the coronavirus pandemic.

There was some optimism in the US Capitol that Demo-crats and Republicans could reach a deal, despite their failure to do so Friday, as Senate Majority Leader Mitch McCo-nnell (pictured) had hoped.

McConnell said negotiators had worked through the night

and were getting closer to a compromise.

“Both sides (and) negoti-ators with the administration are continuing to work toward a bipartisan agreement on major legislation to support American workers and fam-ilies,” McConnell said.

“Small businesses all across the country have made it clear -- if they’re going to keep their lights on and keep their employees on payroll, they need help. And they need it now.”

Chuck Schumer, the top Democrat in the Senate, said:

“We are making very good progress.”

“We are all eager to come to a bipartisan agreement as soon as is humanly possible,” Schumer added.

McConnell’s proposal includes onetime “recovery rebates” of up to $1,200 for most adults, and hundreds of billions of dollars in loan guar-antees to crisis-hit industries, including airlines, and to small businesses.

Democrats continued to press for more benefits to go directly to workers who lose

their jobs. Schumer demanded a sweeping expansion of unem-ployment insurance that would provide furloughed and laid-off workers the same monthly pay that they had before the coro-navirus crisis erupted.

He also called for more support for the beleaguered public health care industry, and for state and local governments which he said are running out of cash.

“We must provide -- they are on the front lines,” he said.

White House economic advisor Larry Kudlow said that

the total amount of government support, with the bill in Con-gress and other programs, could top $2 trillion.

The first procedural vote on the measure was set for Sunday, which could lead to a final vote in the Senate on Monday.

The bill would then have to be approved by the House of Representatives, before being sent to Republican President Donald Trump for his signature.

That could force more negotiations.

On Thursday, House

Speaker Nancy Pelosi said McConnell’s proposal “puts cor-porations ahead of working people.”

“As written, it is a non-starter,” she said in a letter to Democratic colleagues.

Biggest utility bankruptcy in US history is nearing an endBLOOMBERG — NEW YORK

The biggest utility bankruptcy in US history appears to be drawing to a close after PG&E Corp. reached a deal with California Governor Gavin Newsom over the company’s restructuring plan.

The agreement calls for PG&E to put itself up for sale if the bankruptcy court doesn’t approve its plan by June 30 or if the company fails to emerge from Chapter 11 by the end of the year, according to a statement Friday. The deal also requires the embattled utility to overhaul its board and submit to additional state oversight.

“This is the end of business as usual for PG&E,” Newsom said in a statement. “We secured a totally transformed board and leadership structure for the company.” PG&E shares rose as much as 17 percent after the close of regular trading Friday.

PG&E has struggled for months to craft a reorgani-zation proposal that would satisfy both creditors and state officials after filing for Chapter 11 last year facing $30bn in damages from wild-fires blamed on its power lines.

The consent f rom Newsom, who objected to earlier versions of PG&E’s turnaround plan, greatly boosts the odds the utility will exit bankruptcy by a state deadline of June 30.

It’s unclear exactly how

the collapse in markets around the world brought on by the coronavirus outbreak might affect PG&E’s plans to emerge from bankruptcy by the state-imposed deadline and whether that could affect its financing.

PG&E Chief Executive Officer Bill Johnson(pictured) said the company appreciates the governor’s support. “We now look to the California Public Utilities Commission to approve the plan,” Johnson said in the statement.

PG&E also agreed to freeze its dividends for about three years, which will con-tribute an estimated $4bn in equity that, among other things, can help pay down debt. It also agreed to use shareholder funds to offset charges to customers bills for a $7.5bn securitization designed to speed up pay-ments to fire victims.

The deal with Newsom comes as the governor and other officials have turned nearly all their attention to

fighting the coronavirus. Cal-ifornia has been one of the US centers of the pandemic. Newsom on Thursday took the dramatic step of ordering all residents to isolate themselves at home to limit the virus’s spread.

Previously, the utility had pledged reforms including replacing some directors, tying executive pay more closely to safety metrics and dividing up its operations into regional units to better respond to local concerns.

PG&E will also have to submit to a proposal that could lead to a state takeover of the company if it fails to make safety improvements over time. And it must allow a state-appointed “opera-tional observer” to oversee the company’s progress on s a f e t y b e f o r e e x i t s bankruptcy.

PG&E already had made peace with bondholders including Elliott Management Corp. and Pacific Investment Management Corp., which had been threatening to take over the utility with a rival restruc-turing proposal. Previously, the company struck settle-ments with wildfire victims, their insurers and local gov-ernment agencies affected by the blazes.

PG&E’s reorganization still needs approval from the judge overseeing its bank-ruptcy and from the state utility commission, whose members are appointed by the governor.

The all-new Montero Sport 2020 available at Qatar Automobiles CompanyTHE PENINSULA— DOHA

Qatar Automobiles Company, the authorised general distributor of Mitsubishi Motors in Qatar, presents the all-new Montero Sport 2020 at its showroom on Salwa road.

The 2020 Montero Sport gets a fresh new face. The updated look features the new Dynamic Shield front grill, enhanced front bumper design and new LED and fog lights to give the car more tough yet smooth and modern look. On the back, the layout of rear lamps was changed, signal lights and brake lights’ positions have been switched, with a new spoiler out back adding a smoked finish in order to give the car a more sophisticated look.

The Montero Sport 2020 model is equipped with 3.0-LITER V6 MIVEC engine. The high-displacement V6 engine supplies strong acceleration even when carrying heavy loads or traveling uphill. Thanks to

the 8-speed automatic trans-mission – First from Mitsubishi Motors – improved fuel effi-ciency coupled with smoother, more luxurious drive is easily achieved.

Built for maximum stability and traction, the rugged frame and aerodynamically contoured body contribute to solid han-dling and stable highway per-formance. Reliable 4WD traction combines with an advanced suspension to keep the vehicle in touch with surface conditions to stay in firm control. Using the drive mode selector dial, drivers can easily switch between 2WD (2H) and

4WD (4H, 4HLc, 4LLc), while they can Improve traction when driving off road by entering the GRAVEL, MUD/SNOW, SAND or ROCK modes.

The Hill Descent Control (HDC) mode selector activates the HDC, which automatically applies the brakes to maintain current speed when traveling downhill, allowing drivers to concentrate on steering and and the road ahead without having to manually apply the brakes.

Active Stability & Traction Control independently regulates braking force to the wheels during cornering to help maintain excellent vehicle

stability when needed. It also optimizes traction to prevent loss of torque whenever wheel spin is detected by controlling engine output and applying brake force to the spinning wheels.

When starting on a steep slope, Hill Start Assist (HSA) helps prevent from rolling backwards when the brake is released by maintaining the braking force for up to two seconds until the accelerator is applied. Because challenges come in all shapes and sizes, this model is designed to climb up, over, around and through the toughest terrain.

The 2020 Montero Sport

enjoys plenty of safety features that ensure utmost safety of the driver and passengers. The fea-tures include, Forward Collision Mitigation system (FCM]) which helps prevent a frontal collision or reduces damage in the event that a collision unavoidable.

Adaptive Cruise Control (ACC), maintains a set distance between the vehicle and the car ahead via a radar. The tech-nology reduces driver stress during slow traffic on highways.

The Blind Spot Warning system (BSW) and Lane Change Assist (LCA) features utilize radar sensors placed on the rear bumper to detect vehicles on the rear, left and right blind spots.

To further enhance safety, the sensing range has been expanded to better detect the danger of collision with other vehicles during lane changes.

Ultrasonic misacceleration Mitigation System (UMS) helps prevent collisions while parking, a buzzer sounds and a warning displays if front or rear sensors detect a nearby obstacle. Whereas Multi Around Monitor allows the views from cameras mounted on the front, rear and sides of the vehicle (including a bird’s-eye view) to be displayed in various combi-nations to reveal what is in blind spots and help the driver park more safely.

The all-new Montero Sport 2020

Interiors of the all new Montero Sport 2020

S&P warns 1 in

10 US firms may

default on debt

AFP — PARIS

A wave of company defaults is likely to sweep the United States and Europe as measures to contain the coronavirus spark a recession, S&P Global Ratings said on Friday.

The agency said it believes the global economy will go into reverse under the impact of the coronavirus crisis and that companies will see cash flow whither and financing condi-tions tighten.

“These factors will likely result in a surge in defaults, with a default rate on nonfinancial corporates in the US that may rise above 10 percent and into the high single digits in Europe over the next 12 months,” said S&P.

Central banks in the US and Europe have flooded markets with liquidity and freed up banks to boost lending in an effort to help firms weather drops in demand and halts in operations due to confinement measures. S&P said companies rated B- and below will likely suffer most from financing needs and would face rapid downgrades.

A B- credit rating is already several notches into speculative territory, and corporate bonds with these sort of rating are often called by traders “junk bonds”.S&P noted that the number of companies rated B- and below had increased sig-nificantly in the US and Europe. “These low ratings indicate a higher vulnerability to adverse business, financial or economic conditions,” said S&P.

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18 SUNDAY 22 MARCH 2020BUSINESS

US Fed balance sheet (USD trillion)

The coronavirus outbreak is seriously disrupting economic activity in many countries and has significantly affected global financial conditions. The outbreak has quickly spread around the world and is now seriously impacting the United States.

On March 15, the Federal Reserve (the Fed) first responded with another emer-gency cut to interest rates, effectively lowering them to zero. Second, the Fed also undertook a related set of actions to provide liquidity including at least an additional $700bn of quantitative easing (QE). Third, the Fed made adjustment to its open market operations and returned to crisis management tools used in 2009.

This week we will explain why the Fed needed to do more than simply cut interest rates to zero and how these addi-tional measures help to support the economy at these difficult times.

Monetary policy works by raising, or lowering, the cost of credit for households and business. The Fed’s main tool for implementing monetary policy is its policy interest rate, the federal funds rate.

The easiest way to think about monetary policy is like

driving a car. Lowering rates is pressing your foot down on the accelerator, whilst raising rates is switching your foot to press on the brake pedal. In such a simple model, cutting interest rates to zero is having your foot to the floor on the accelerator.

During the 2008 global financial crisis, interest rates hit their zero lower bound and financial markets fell into a liquidity trap. The financial system became dysfunctional

when banks become too uncertain about the solvency of counterparties. In such cir-cumstances the Fed must turn to additional tools to ease monetary policy and more directly provide credit and liquidity to households and business.

These additional tools include the introduction of quantitative easing, adjust-ments to open market opera-tions and crisis management tools.

QE involves the Fed pur-chasing financial assets, with purchases spread over many months and focused on bonds with longer maturities. QE aims

to lower long-term borrowing costs.

The Fed launched three QE programs (QE1, QE2 and QE3) in response to the 2008 global financial crisis. On the 15th March the Fed launched Q4 stating that it would increase its “holdings of Treasury secu-rities by at least $500bn and its holdings of agency mortgage-backed securities by at least $200bn without specifying over what time period.

The Fed sets the federal

funds rate by controlling liquidity in the US banking system through open market operations (OMOs). However, in its normal OMOs the Fed only deals directly with 24 “prime brokers” who then provide liquidity to the broader financial system.

Direct operations involve the Fed buying or selling short-term government securities. Repurchase operations or “repo” involve the Fed lending money secured against col-lateral securities.

The Fed also engages in foreign exchange operations, typically via foreign exchange swaps with other central banks, to provide USD liquidity to foreign banks.

A period of quantitative tightening (QT) and balance sheet “normalization” in 2018 led to spikes in over-night interest rates. The Fed responded in late 2019 by increasing the amount of liquidity it provided via normal OMOs From the 12th March the Fed has committed to offer up to $5 trillion of liquidity via normal OMOs. However, the level of vola-tility in financial markets in the past week has prevented liquidity from spreading effectively around the financial system to house-

holds and corporates.Therefore, on the 15th

March the Fed also announced a reduction in the cost to banks of accessing liquidity via its discount window. This is important as many smaller banks are not qualified to par-ticipate in normal OMOs and only have access to the Fed’s discount window.

In addition, on the 17th March the Fed and US Treasury collaborated to set up a special purpose vehicle (SPV) that will provide up to $1 trillion of liquidity. The SPV will provide liquidity secured against a wider range of collateral, including stocks and corporate securities with appropriate haircuts.

By the 18th March, the Fed

had already injected over $1 trillion in liquidity.

It is clear that with these measures, the Fed is actively engaged in preventing the coronavirus outbreak from causing a full blown financial crisis. Fortunately, the Fed has a wide set of tools, plenty of experience and unlimited capacity to support the financial system. However, the Fed’s monetary stimulus will only become fully effective once governments have brought the coronavirus under control.

The monetary stimulus will be further enhanced by the effective implementation of the $1 trillion fiscal response that was announced on March 17.

Fed cuts interest rates to zero, pours liquidity into the system

QNB ECONOMIC COMMENTARY

On March 15, the Federal Reserve first responded with another emergency cut to interest rates, effectively lowering them to zero. Second, the Fed also undertook a related set of actions to provide liquidity including at least an additional $700bn of quantitative easing (QE). Third, the Fed made adjustment to its open market operations and returned to crisis management tools used in 2009.