The oil price plunge and the production cuts after the coronavirus pandemic will hit oil exporters in the Middle East and North Africa (MENA) hard, with the combined oil income for those countries expected to plummet by US$270 billion this year compared to 2019, the International Monetary Fund (IMF) said in its latest update on the region on Monday.
The sharp decline in oil prices earlier this year adds further headwinds to the economies of the Middle Eastern oil producers, on top of shrinking economies due to the lockdowns to contain the pandemic, the IMF said.
"The larger-than-expected production cuts implied by the OPEC+ agreements together with lower oil prices will have a negative impact on exports. These factors have led to a stronger-than-anticipated impact on activity in the first half of 2020, while the recovery is projected to be more gradual than previously forecast, in line with a weaker global recovery," the IMF said.
The economy in the MENA region's oil-exporting countries is now seen collapsing by 7.3 percent this year, a downward revision of 3.1 percentage points compared to the regional forecast from April. The economic growth for next year was revised down by 0.8 percentage points to 3.9 percent. These large downward revisions "reflect the 'double whammy' from oil price fluctuations (and supply cuts) and the pandemic-linked lockdowns," according to the fund.
The economies in the Gulf alone are set to experience a combined contraction of 7.6 percent this year because of the oil price crash, a senior IMF official forecast earlier this month.
This is a sharp downward revision from an earlier forecast by the international lender, which saw the Gulf economies—the six states that make up the Gulf Cooperation Council—experiencing negative growth of 2.7 percent.
"The oil sector will shrink sharply by around 7.0 percent and it will be accompanied by a drop in the non-oil sector also," said Jihad Azour, director of the Middle East and Central Asia department of the International Monetary Fund said at a webinar this week.