Oil-exporting countries in the Middle East and North Africa are expected to face a $270 billion slump in oil revenues in 2020 compared to last year due to the drop in oil prices and production cuts under the OPEC+ agreement, according to a report released by Washington-based International Monetary Fund (IMF).
The region's economy will contract by 5.7% this year and shrink by as much as 13% in countries torn by conflict, it warned.
Along with these contractions, it said that gross domestic product (GDP) growth for the region is projected to fall to negative 7.3%, which reflects the double whammy from oil price fluctuations and Covid-19 lockdowns.
"This is a dramatic downturn that will aggravate existing economic and humanitarian challenges and raise already high poverty levels," the IMF said.
Large and growing deficits are expected to raise public debt levels to 95% of GDP among Middle East oil importers by the end of this year. Debt levels are forecast to grow rapidly in Sudan to 258% of GDP, in Lebanon to 183% and in Egypt to over 90%, it added.
Hampered trade, tourism, and remittances as well as tighter global financial conditions and spillovers on domestic credit markets mostly reduce the benefits of oil importers from lower oil prices, the IMF said.
Moreover, current account balances of oil exporters in the region are projected to deteriorate further in 2020 to 5.4% of GDP in 2020 compared to 3.2% last year, amid the erosion of tourism and remittances receipts and oil supply cuts.
The projection is the lowest in over 50 years, according to World Bank data, and comes after the region posted modest growth last year.
Oil prices plunged by about two-thirds as the global economy ground down to prevent the spread of Covid-19.
OPEC and non-OPEC oil-producing nations, dubbed as the OPEC+ group, agreed on June 6 to extend the current production cut agreement that curbs total output by 9.7 million barrels per day (bpd) from June 30 until the end of July to bring balance to the global oil market and raise low prices.
Crude prices have since recovered amid OPEC+ production cuts.
OPEC+ will consider curbing its oil supply cut to 7.7 million bpd from the ongoing level of 9.7 million bpd amid signs of increased global oil demand.
However, if weak global oil consumption continues with the rise in new Covid-19 cases, any increase in OPEC+ output could easily cause a plummet in crude prices.
By Busranur Begcecanli