IMF’s said in its latest World Economic Outlook report noting that low oil prices will have a huge impact on exporters.
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However, a partial rebound is expected in 2021, with the world economy growing at 5.08 percent rate but it is marked by “extreme uncertainty” and outcomes could be far worsen depending on the course of the coronavirus pandemic, the global organisation said.
In the UAE, real GDP growth is forecast to slip by 3.5 percent compared to 1.3 percent recorded in 2019. Saudi Arabia’s growth is forecast at -2.3 percent, with non-oil GDP contracting by 4 percent
Qatar’s real GDP is projected to fall by 4.3 percent in 2020 while Oman’s is projected to decline by 2.8 percent.
According to the outlook, Kuwait fared better with a projected growth of -1.1 percent compared to 0.7 percent in 2019.
Almost every country in the the Middle East and North Africa (MENA) region is forecast to shrink in 2020. Egypt is the only nation the IMF expects to post any growth this year, at 2 percent. However, that is still far lower than the 5.6 percent expansion seen last year.
Gita Gopinath, Economic Counsellor of the IMF said the low oil prices, which is a combination of the sharp drop in demand coming out of this coronavirus crises and also the breakdown of OPEC Plus negotiations, will have an important impact on the oil producers.
“We are assuming in our projections that the price of oil will be around $35 for 2020 and around that level for 2021 and then go back up to $45. So that is still well below the prices that we say pre-virus and that has an important impact on countries that are oil producers,” Gopinath said.
Gian Maria Milesi-Ferretti, Deputy Director in the Research Department of the IMF said weakness in oil prices implies lower fiscal revenues for oil exporters and would result in lower spending by the government, lower support of the non-oil sectors, lower revenues flowing to that sector and hence lower growth.
“While the redistribution favors oil importers, the risk is that vulnerable oil exporters will be forced to very drastic reductions in aggregate spending and demand and that could weigh on global economic activity,” Milesi-Ferretti said.
Writing by Seban Scaria
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