Oil exporting countries in the Middle East lost a staggering $390 billion in revenue due to lower oil prices last year and should brace for even deeper losses of more than $500 billion this year, the International Monetary Fund said on Monday.
The fund had projected in October that oil exporting countries in the region would see revenue losses of $360 billion in 2015, but oil prices took a tumble by the yearend and the drop in revenue amounted to $30 billion more, CNBC reported.
In a revised economic outlook report released on Monday, the IMF said these countries will see revenues from oil exports drop even more in 2016, to between $490 billion and $540 billion compared to 2014, when oil prices were higher.
From $115 a barrel in mid-2014, oil prices plunged to their lowest levels in more than a decade in January before bouncing back to above $40-a-barrel range in recent weeks.
IMF Director for Middle East and Central Asia Masood Ahmed said these losses translate into budget deficits and slower economic growth, particularly for countries like Saudi Arabia that are still heavily dependent on oil to finance their spending.
------- Saudi Budget Deficit
Though the kingdom has been working on plans to overhaul its economy, oil still accounted for 72% of total revenue last year and Saudi Arabia projects a budget deficit of nearly $90 billion this year.
The report said economic growth in the six (Persian) Gulf Cooperation Council countries of Saudi Arabia, Kuwait, Qatar, Bahrain, Oman and the UAE will slow from 3.3% in 2015 to 1.8% this year. Saudi Arabia, OPEC's top exporter, will see growth at just above 2%.
The IMF has encouraged reforms that would limit public spending on welfare programs and handouts that citizens in the Persian Gulf have become accustomed to, such as lifting subsidies and tightening public sector wage bills to offset the impact of declining revenues.
Already, most (P)GCC countries have raised fuel, water and electricity prices. Outside the six-nation group, oil exporter Algeria recently hiked fuel, electricity and natural gas prices.
"Oil prices are likely to improve from where they are, but they're not going to go back to the figures that we saw in 2013 and 2014 for a long, long time, so this means that many of them have to cut back spending and they also have to try to raise revenue outside the oil sector," Ahmed told AP.
------ Iran's Growth
Though Iran's growth was at zero in 2015, its economy is expected to grow 4% in 2016 and 3.7% in 2017 as it ramps up oil production and looks to increase trade and investment with the easing of international sanctions.
The forecast puts Iran's economy on a reverse path compared to its Arab neighbors whose oil-driven economies are bearing the brunt of falling oil revenues more deeply.
The Washington-based organizations warns that just among oil exporters in the region, 10 million young people are expected to enter the workforce by 2020, yet 3 million of them will find themselves without jobs at the current pace of development.
Young people's frustration at their lack of prospects was a key driver of the Arab Spring uprisings that rocked the Middle East in 2011.
The report said the war in Syria has had a negative spillover effect on the economies of neighboring Jordan and Lebanon. From October and March alone, more than 600,000 people fled Syria due to the fighting, bringing the total number of refugees to almost 5 million.
In Egypt, political turmoil has held back growth due to concerns over security. However, lower oil prices have reduced energy subsidy bills there.
