The International Monetary Fund (IMF) in a report on Wednesday said that crude oil exporters across the Middle East, North Africa, Afghanistan, and Pakistan (MENAP) region would lose more than $230 billion in oil revenue in 2020 if oil prices continue to hover around the current level, while their breakeven oil prices are set to surge as spending needs increase.
MENAP budgets are expected to be strained in a time when they need to spend more to combat the pandemic while oil revenue is set to fall. This will eventually force those nations to balance their budgets by raising fiscal breakeven crude prices. Algeria, Bahrain, Iran, and Oman have already had breakeven oil prices of more than $80/barrel, the IMF said, far exceeding the current level of around $30/barrel.
The IMF also forecast that fiscal deficits of MENAP oil exporters would swell from 2.8% of GDP in 2019 to 10% this year. This is attributed to higher expenditure to fight the coronavirus pandemic and its economic fallout. The combined economy of MENAP oil exporters is then forecast to rebound by 4.7% next year.
The IMF slashed MENAP economic projection to minus 4.2% in 2020, compared to its previous projection of a 2.1% growth. The combined economy of the Gulf Cooperation Council members (Saudi Arabia, Kuwait, the UAE, Oman, Qatar, and Bahrain) is expected to shrink by 2.7%, versus October's projection of 2.5% growth, the IMF said.
Iran is forecast to see its economy shrinking by 6% in 2020. Algeria's GDP is projected to contract by 5.2% dragged by falling oil production and loss of export market share. Iraq's growth is estimated at minus 4.7% as oil output falls 2% due to security issues and supply chain disruptions. Saudi Arabia's GDP will likely contract by 2.3%, while the economy of the UAE and Kuwait is expected to shrink 3.5% and 1.1%, respectively.
Libya is expected to be the hardest hit country in MENAP, with an expected economic contraction of 60%, according to the IMF. Libya has suffered a collapse in oil prices due to political unrest between two opposing factions for the control of the country's oil assets. The IMF forecast Libya's economy contract by nearly 60%.
