Countries in the group OPEC + (Organization of Petroleum Exporting Countries – OPEC, plus partners) are on the brink of financial crisis if the latest assessment of the International Monetary Fund (IMF) is correct.
|Oil exploration activities in the UAE. Photo: Getty Images|
In the recently updated World Economic Outlook (WEO), the IMF gave a poor assessment of the possibility of economic recovery in the Middle East and Central Asia, with a forecast of negative GDP growth of 4.1. % for this whole area. The main reason leading to this gloomy outlook is the IMF’s prediction that oil prices will remain low, fluctuating between $ 40-50 / barrel in 2021.
The low oil price for another year will strongly affect the oil and gas exporting countries, including all OPEC + member countries. In its statement in April 2020, the IMF forecasts a 2.8% decline in the Middle East and Central Asian economies in 2020. The difference between the two updates shows the strong impact of low oil prices on countries. economy in the region.
IMF’s director for Middle East and Central Asia, Jihad Azour, particularly noted that the large disparity in economic losses between the oil and gas exporting and importing countries in this region is affected by the services and oil prices plummeted.
According to him, the combination of those two shocks led to a sharp decline in different economic performance between oil exporting and importing countries. The IMF forecasts negative growth of 6.6% for oil exporting countries and negative 1.3% growth for all importers.
The majority of OPEC + members’ revenues depend on oil exports. Several OPEC countries have experienced large budget deficits in 2020, especially in Saudi Arabia, the United Arab Emirates (UAE), Iraq, Iran and Kuwait. Qatar, a former OPEC member, has a similar problem, though trying to minimize the negative impact through increased exports of liquefied petroleum gas (LNG).
Because the demand for both oil and gas has fallen sharply this year, the export prices of these two items are at low levels. Currently, North Sea Brent oil is still about 40% lower than the time before COVID-19 appeared.
There is little hope that prices will bounce back soon, as oil and gas stocks are still standing at record highs, while demand is weak after some new COVID-19 outbreaks in many countries, Many governments have to close down on a small scale, accompanied by worries about economic recession.
Normally, the oil price for Saudi Arabia to reach the budget equilibrium point is 80 USD / barrel. However, the government is currently discussing a fiscal year 2021 with a price tag of 50 USD / barrel. Iraq also said this is the price it is expected for 2021.