> IMF, 'Urgency' for oil exporters to adjust spending

World: IMF, 'Urgency' for oil exporters to adjust spending

2015/11/01

Political turmoil in the Middle East and a sharp decline in oil prices highlights the "urgency" oil exporting nations should have in adjusting their government spending plans, according to the new regional outlook from the International Monetary Fund (IMF).

The IMF estimate increase in the Middle East, North Africa, Afghanistan and Pakistan (MENAP) region would be 2.5 % in 2015, down from increase of 2.7 % last year and down 0.5 % points from the fund's last predictions in May.

The loss of increase momentum is largely down to the additional than 50 % decline in oil prices since June 2014 (again, a barrel of benchmark Brent crude traded at $114 a barrel, presently it costs around $48) and growing political turmoil in swathes of the region, caused by civil war and conflict.

The IMF's statement, produced under the Fund's Director of the Middle East and Central Asia, Masood Ahmed, said that "the near-term outlook for the MENAP region is dominated by geopolitical and oil price developments."

"Regional uncertainties arising from the complex conflicts in Iraq, Libya, Syria, and Yemen are weighing on confidence," the IMF said, while "low oil prices are as well taking a toll on economic activity in the oil-exporting nations."
'Urgency' for oil exporters

Oil-exporting nations such as Saudi Arabia, Iran, Iraq, Kuwait, Qatar, UAE, Algeria and Libya who are all members of the powerful Organization of Oil-Exporting Nations, OPEC, have all seen their governments' revenues drop sharply as a result of a decline in oil prices.

Despite the increased pressure on governments, OPEC has so far refused to cut oil production to support prices in a bid to maintain its market share of the industry and to put pressure on rival U.S. shale oil producers.

The IMF predicted that oil exporting nations in the Middle East would continue to grapple with lower oil prices and that MENA (excluding Afghanistan and Pakistan) would see $360 billion decline in export revenues this year.

Read MoreCommodity prices pile pressure on Middle East

The oil price decline has "increased the urgency for MENAP oil exporters to adjust their fiscal policies," the IMF said, predicting fiscal deficits to be 12.7 % of GDP in the MENAP oil exporter nations and 7.3 % of GDP in MENAP oil importer nations in 2015.

For Saudi Arabia, OPEC's major oil producing member and de facto leader, the IMF predicted a fiscal deficit of 21.6 % of GDP in 2015. As such, oil exporters needed to adjust their spending, the IMF urged.

"Because the oil price drop is likely to be large and persistent, oil exporters will need to adjust their spending and revenue policies to fasten fiscal sustainability, attain intergenerational equity, and gradually rebuild space for policy manoeuvring," it said, warning that adjustment plans in most MENAP oil exporters "are currently insufficient to address the large fiscal challenge."

Adding to the gloom, the IMF warned that if regional conflicts, such as the civil wars in Syria, Iraq, Libya and Yemen prove to be "additional persistent than expected, they would reduce increase in the affected nations, with adverse spillovers to the region and beyond."
Bright spots?

While the outlook may not look so rosy for oil exporters in the region, oil importing nations like Egypt, Jordan, Syria and Lebanon have benefitted from lower oil prices "inclunding economic reforms and improved euro area increase," the IMF remarked.

Oil importers' "strengthening recovery" could be upset by a wider world slowdown, however. The predictions come against a backdrop of uneven and uncertain world increase, with concerns about a slowdown in China, the world's second major economy, looming large.

Before in October, the IMF revised world increase forecasts lower again, predicting 3.1 % increase in 2015 although it expected increase to accelerate to 3.6 % in 2016.

Although the IMF said that for the MENAP region, increase could well improve to 4 % in 2016, "supported by improved prospects for Iran, some recovery in oil production and exports, and assumed easing of regional conflicts," there is considerable uncertainty about next year's projections, it said.

"Moreover, raising economic prospects for the long term will require extensive structural reforms."

Related Articles

Mobilizing Education for Global Health
2016/06/11 Education is a fundamental right for everyone, from presently on lack of access to education continues to be a core driver in the world health epidemic. Across the world, 59 million children and 65 million adolescents are out of school and additional than 120 million children do not complete primary education. Education is often referred to as the great equalizer and is critical to improving socio-economic conditions. It opens doors to better employment, access to healthcare and from presently on the ability to support a family. At the same time as families are educated, healthy and self-sufficient, they can strengthen their communities.
Smart Thinking for Healthy Lifestyles
2016/06/11 Since the start of this millennium, we have witnessed a lot of success stories in world health. Death from infectious diseases like malaria and tuberculosis have been cut in half. A child is twice as likely to survive completed their fifth birthday than he or she was fifteen year ago. Hunger and malnutrition remain, but affect a smaller % of the world’s people than ever before. From presently on there is an area where the trends are not in our favor. Non-communicable diseases (NCDs), inclunding cardiovascular diseases, respiratory diseases, cancer and diabetes, are the world’s leading cause of poor health, and growing in prevalence. In low-and middle-gain nations (LMICs), where health systems are often strained, under-equipped and under-staffed, NCDs lead to the premature death of over 13 million people each year.
Building a Global Action Platform to Create Abundant Food, Health, and Prosperity—While Saving the Planet’s Ecology
2016/06/11 The grand challenges of poverty, health, and economic prosperity can be solved. Indeed, it is possible to harness an emerging alliance of institutions, a growing knowledge base, technology platforms, and innovations to unleash an abundant and ecologically sustainable next for each person and for the earth. World Action Platform began with this bold vision in 2012. A lot of criticized this vision at the time, but today, our founding vision is gaining ground. Indeed, with the 2015 launch of the Sustainable Development Goals, this vision is being embraced actively by a growing network of corporations, universities, investors, governments, and NGOs around the world.
The Export Crisis
2016/06/11 The belief in free trade is almost religious in nature. Mainstream economists have consistently argued that free trade benefits everyone. This is in spite of the fact that the United States developed as it did under protectionist policies, as did post-war Germany, Japan and China among others. Perhaps these countries would have developed farther and faster had they developed free trade policies earlier, but there are reasons to believe this is not the case. The theory may be correct that, in the long run, the law of comparative advantages takes hold and generates greater wealth. The problem is that the ‘long run” is an unknown quantity, and that the economic and political clocks run at different speeds.
World Bank advices to change IT rates
2016/05/28 The World Bank (WB) experts have investigated the Data and Communication Technologies (IT) sector of Azerbaijan, Baku office of the bank announced on May 24. The World Bank and the government of Azerbaijan have presented the results of the study named “The Data Technology sector in Azerbaijan and IT-skills: challenges and opportunities,” . “The strengths and weaknesses of the IT sector in Azerbaijan and the difference between the IT skills offered by the education system and the requirements of employers in IT sphere were evaluated during the research,” they noted. The study was based on discussions with the government, interviews with interested parties from the public and private sector and surveys part the major subjects of IT industry and technological universities.