Oil exporting countries in the Middle East lost a staggering $390 billion in revenue due to lower oil prices last year, and should brace for even deeper losses of around $500 billion this year, the International Monetary Fund said Monday.
The fund had projected in October that oil exporting countries in the region would see revenue losses of $360 billion in 2015, but oil prices took a tumble by year’s end and the drop in revenue amounted to $30 billion more.
In a revised economic outlook report released Monday, the IMF said these countries will see revenues from oil exports drop even more in 2016, to between $490 billion to $540 billion compared to 2014, when oil prices were higher. Oil prices plunged to around $30 a barrel in January compared to $115 in mid-2014.
IMF Director for Middle East and Central Asia Masood Ahmed said these losses translate into budget deficits and slower economic growth, particularly for countries like Saudi Arabia that are still heavily dependent on oil to finance their spending. Though the kingdom has been working on plans to overhaul its economy, oil still accounted for 72 percent of total revenue last year and Saudi Arabia projects a budget deficit of nearly $90 billion this year.
The report said that economic growth in the six Gulf Cooperation Council countries of Saudi Arabia, Kuwait, Qatar, Bahrain, Oman and the United Arab Emirates will slow from 3.3 percent in 2015 to 1.8 percent this year. Saudi Arabia, the region’s biggest economy, will see growth at just above 2 percent.
The IMF has encouraged reforms that would limit public spending on welfare programs and handouts that citizens in the Gulf have become accustomed to, such as lifting subsidies and tightening public sector wage bills to offset the impact of declining revenues. Already, most GCC countries have raised fuel, water, and electricity prices. Outside the GCC, oil exporter Algeria recently hiked fuel, electricity, and natural gas prices, and Iran increased fuel prices.