Thursday 22 March 2018

Middle-East oil giants face trillion-dollar crunch - IMF

The IMF warned about the effects of the low oil price
The IMF warned about the effects of the low oil price

Peter Spence

The Middle East’s oil export giants face a $1trn crunch over the next five years if oil prices remain at their post-slump levels, the International Monetary Fund has warned.

A vicious oil price rout since last summer has seen the revenues of oil exporting nations eroded away, wiping out a combined $360bn in exports over the past year.

The IMF predicts that oil will average $52 a barrel this year - well below the $115 it fetched last June - indicating that many governments will struggle to make ends meet.

The rise of conflict has delivered a second blow to the Middle East, North Africa, Afghanistan and Pakistan, or “MENAP” region. The IMF said that fighting in Iraq, Libya, and Yemen could spillover into neighbouring countries.

Apart from Kuwait, Qatar, and the United Arab Emirates, most countries will find that oil is nowhere near the “break-even” levels they require to balance their books. “Oil exporters will need to adjust their spending and revenue policies to secure fiscal sustainability,” the fund said.

Many economies will find themselves reliant on whatever financial assets they have left - their “fiscal buffers” - in order to survive after the sharp falls in income they now face. Yemen, Libya, and Bahrain are among those set to run out of room within the next five years.

The outlook for the MENAP region “is dominated by geopolitical and oil price developments”, the IMF said in a report. The fund predicts that the area’s oil exporters will see GDP rise by 2.5pc this year, lower than the 3pc it had pencilled in in May.

“There is considerable uncertainty about next year’s projections,” the IMF said, highlighting that raising the region’s longer-term prospects would “require extensive structural reforms”.

The fund acknowledged that growing risks to global growth could further imperil the fiscal footing of economies in the region.

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