Because of low oil prices, less revenue for oil exporters from the Middle East amounted to $390 billion in 2015. This year the figure may reach $150 billion, according to the IMF forecast, according to The Wall Street Journal.
The decrease in revenue is a direct result of the reduction in price of oil, which cost fell from $115/bbl. in mid-2014 to below $30/bbl. at the beginning of 2016, the document says. Now quotes are holding above $40/bbl. The decrease in oil revenues negatively affects the leading oil-producing economies such as Saudi Arabia and Kuwait, which ended last year with a huge deficit in their budgets.
To ease the pressure on the fiscal sphere, some of them had to go on unpopular measures — from reducing subsidies in the energy sector before the tax increase. In addition, Saudi Arabia and its neighbors in the region have begun to spend reserves in foreign currencies and entered the international borrowing market.
“2016 is the second in a multi-year cycle, during which the middle East oil-producing countries need to take measures to balance their budgets — leads the publication the words of Masood Ahmed, Director of IMF Middle East and Central Asia. — Favorable conditions in the fiscal sphere…will occur only after four to five years, during which it is necessary to ensure expenses and income”.
GDP of the oil economies of the region by the end of 2016 will grow by 3% against 2% last year, mainly due to the improved prospects of developing the oil production of Iraq and Iran, seeking to benefit through the removal of international sanctions, according to a survey. While business activity in the Gulf countries is expected to slow down amid efforts by the authorities aimed at curbing the growing budget deficit.
According to Ahmed, the countries of the region “firmly” respond to the decline in oil prices. However, they need to abandon the economic model, in which the largest employer is the state, in favor of a system where all major role in the creation of jobs allocated to the private sector, said Ahmed. The expert puts in the example of Malaysia, Indonesia and Chile, which managed to reduce its dependence on energy.
According to the IMF, in the next five years the working population of the Middle East will grow at the expense of young people by 10 million, and the current pace of job creation is insufficient for the employment of all those who will be in this market. If the pace of job creation will remain the same, by the end of the five-year period, the number of unemployed in the region will reach 3 million people, predicts Ahmed. Youth unemployment is 20%, he adds.