Oil exports from the (Persian) Gulf Cooperation Council are expected to decline by $287 billion in 2015, in light of the current oil prices, the International Monetary Fund (IMF) said Tuesday, Mubasher reported.
Meanwhile, oil-exporting countries in the Middle East and North Africa (MENA) region will record a deficit of $55 billion in 2015 on tumbling oil prices, the IMF said in its latest regional report. Oil exports outside the (P)GCC are likely to fall by $90 billion, the IMF said.
It predicts that the bloc’s combined budget surplus of $76 billion in 2014 will turn into a deficit of $113 billion, or 8 percent of gross domestic product, this year.However, the fund expects these countries to gradually record a cash surplus in the medium-term, accounting for 3.25% of GDP by 2020 on a potential rise in oil prices.
Between July 2014 and April 2015, oil prices dropped by 50 percent. They are now expected to be $58 per barrel in 2015 before rising gradually to $74 per barrel by 2020, in response to a decline in oil investment and production and a pickup in oil demand as the global recovery strengthens.
“Despite the sharp decline in oil prices the downward pressure on (P)GCC economies has been limited because these countries have been able to use their substantial financial buffers to mitigate shortfall in oil revenues,” said Masood Ahmad, director of the Middle East and Central Asia department at IMF.
According to the IMF forecasts, the current oversupply in the global oil market suggests that (P)GCC may face challenges in maintaining market share, with potential downside pressures on oil production. Government spending and hence non-oil activity may slow down by more than expected.
(P)GCC banks are expected to remain sound despite the sharp decline in oil prices and slowing loan growth, because they have strong initial financial positions. They will also be supported by continuing government infrastructure investments which drives non-oil growth, bank credit, and profitability. Liquidity could tighten as oil-related bank deposits decline, and non performing loans (NPLs) could rise. However, banks are well positioned to absorb the shocks.
By contrast, non-(P)GCC banks are more vulnerable. Iran’s banking system is already exhibiting system-wide stress, on the back of high NPLs, because of a weaker economic environment and the withdrawal of correspondent banks in response to sanctions.
