According to the International Monetary Fund‘s Regional Economic Outlook: Middle East and Central Asia latest report, oil prices will stay between $40 – $50 per barrel, putting additional pressure on the oil exporters in the Middle East.
The gross domestic product in the region will drop by 4.1% in 2020, a downward revision of 1.3% from IMF’s forecast earlier this year. The oil exports in the Middle East and North Africa are predicted to suffer the most as their economies will shrink by 6.6% this year.
The Fund said the countries in the Gulf Cooperation Council (GCC) – Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates (UAE)—will see their economies slump by 6.0% in 2020, before rising by 2.3% in 2021.
In the second quarter, the world’s largest oil exporter, Saudi Arabia’s economy already shrank by 7% in response to the oil price crash due to the coronavirus pandemic.
Excerpts from the report:
“Oil exporters were particularly hard hit by a “double-whammy” of the economic impact of lockdowns and the resulting sharp decline in oil demand and prices.”
“The coronavirus disease (COVID-19) pandemic has required a substantial fiscal response from all countries, resulting in the largest synchronous fiscal easing in oil importers and a significant one in oil exporters. Nonetheless, the size of fiscal measures is slightly below that of other emerging market and developing economies, reflecting already-strong health and welfare systems in some economies and limited fiscal space in others. While the emergency measures have been critically important, these, along with significant declines in revenues, will increase financing needs for the region. Higher debt and deficits will erode fiscal space, leaving the region vulnerable to a resurgence of the virus and, for some countries, resulting in unsustainable debt dynamics.”
“In this exercise, the Middle East, North Africa, Afghanistan, and Pakistan (MENAP) region is hit particularly hard—oil exporters face the largest losses while bank capital in several oil importers falls below regulatory minimum requirements.”
“Middle East and Central Asia. It has been assumed that established policies of national authorities will be maintained, that the price of oil will average US$41.69 a barrel in 2020 and US$46.70 a barrel in 2021, and that the six-month London interbank offered rate (LIBOR) on U.S.-dollar deposits will average 0.74 percent in 2020 and 0.41 percent in 2021. These are, of course, working hypotheses rather than forecasts, and the uncertainties surrounding them add to the margin of error that would in any event be involved in the projections.”
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%20-%20Bahrain,%20Kuwait,%20Oman,%20Qatar,%20Saudi%20Arabia,%20and%20the%20United%20Arab%20Emirates%20(UAE)—will%20see%20their%20economies%20slump%20by%206.0%%20in%202020,%20before%20rising%20by%202.3%%20in%202021.In%20the%20second%20quarter,%20the%20world's%20largest%20oil%20exporter,%20Saudi%20Arabia's%20economy%20already%20shrank%20by%207%%20in%20response%20to%20the%20oil%20price%20crash%20due%20to%20the%20coronavirus%20pandemic.Excerpts%20from%20the%20report:emOil%20exporters%20were%20particularly%20hard%20hit%20by%20a%20“double-whammy”%20of%20the%20economic%20impact%20of%20lockdowns%20and%20the%20resulting%20sharp%20decline%20in%20oil%20demand%20and%20prices./ememThe%20coronavirus%20disease%20(COVID-19)%20pandemic%20has%20required%20a%20substantial%20fiscal%20response%20from%20all%20countries,%20resulting%20in%20the%20largest%20synchronous%20fiscal%20easing%20in%20oil%20importers%20and%20a%20significant%20one%20in%20oil%20exporters.%20Nonetheless,%20the%20size%20of%20fiscal%20measures%20is%20slightly%20below%20that%20of%20other%20emerging%20market%20and%20developing%20economies,%20reflecting%20already-strong%20health%20and%20welfare%20systems%20in%20some%20economies%20and%20limited%20fiscal%20space%20in%20others.%20While%20the%20emergency%20measures%20have%20been%20critically%20important,%20these,%20along%20with%20significant%20declines%20in%20revenues,%20will%20increase%20financing%20needs%20for%20the%20region.%20Higher%20debt%20and%20deficits%20will%20erode%20fiscal%20space,%20leaving%20the%20region%20vulnerable%20to%20a%20resurgence%20of%20the%20virus%20and,%20for%20some%20countries,%20resulting%20in%20unsustainable%20debt%20dynamics./ememIn%20this%20exercise,%20the%20Middle%20East,%20North%20Africa,%20Afghanistan,%20and%20Pakistan%20(MENAP)%20region%20is%20hit%20particularly%20hard—oil%20exporters%20face%20the%20largest%20losses%20while%20bank%20capital%20in%20several%20oil%20importers%20falls%20below%20regulatory%20minimum%20requirements./emem“Middle%20East%20and%20Central%20Asia.%20It%20has%20been%20assumed%20that%20established%20policies%20of%20national%20authorities%20will%20be%20maintained,%20that%20the%20price%20of%20oil%20will%20average%20US$41.69%20a%20barrel%20in%202020%20and%20US$46.70%20a%20barrel%20in%202021,%20and%20that%20the%20six-month%20London%20interbank%20offered%20rate%20(LIBOR)%20on%20U.S.-dollar%20deposits%20will%20average%200.74%20percent%20in%202020%20and%200.41%20percent%20in%202021.%20These%20are,%20of%20course,%20working%20hypotheses%20rather%20than%20forecasts,%20and%20the%20uncertainties%20surrounding%20them%20add%20to%20the%20margin%20of%20error%20that%20would%20in%20any%20event%20be%20involved%20in%20the%20projections.”/emTo%20read%20the%20full%20report%20a%20href=https://www.imf.org/en/Publications/REO/MECA/Issues/2020/10/14/regional-economic-outlook-menap-cca#ch1click%20here/a){kind=link}