The International Monetary Fund (IMF)expects Gulf economies to receive up to $1.4 trillion in additional revenue in the next four to five years as oil prices continue to rise and inflation rates remain low in the six-member economic bloc.
“If we look at the next four to five years, we expect more than $1 trillion to $1.4 trillion in additional revenue for oil-exporting countries, especially the GCC countries,” Jihad Azour, director of the Middle East and Central Asia region at the IMF, saiid in an online panel discussion. Gulf Cooperation.
“So it does not suffer like other countries through increased prices of food and basic commodities,” Azour said.
The world is facing a commodity super-cycle, driven by Russia’s military offensive in Ukraine, which has slowed the momentum of economic growth, undermined global trade, and exacerbated inflationary pressures.
The price hike has a significant economic impact on the region
On Tuesday, Azour wrote in a blog with Gita Mencolassi and Rodrigo Garcia Verdo that the rise in commodity prices, which the war in Ukraine had pushed up, would have a major economic impact on the Middle East and North Africa region.
The three said that this price hike comes at an uneasy time for recovery in the region. “In our Regional Economic Outlook, we revised our growth forecast for the Middle East and North Africa as a whole by 0.9 percentage point to 5 percent, but this reflects improved prospects for oil exporters thanks to higher oil and gas prices,” the blog said.
For oil-importing countries, the IMF lowered its forecast, as higher commodity prices increased challenges in regard to high inflation and debt, tightening global financial conditions, uneven progress on vaccination, and underlying fragility and conflict in some countries.
Increases in commodity prices will also have a significant negative impact on the external accounts of oil importers. The Fund expects these countries’ current account balances to deteriorate by one percentage point of GDP, on average.
For low-income countries, higher wheat prices alone would be a major blow, deteriorating current accounts by about 1.2 percent of GDP on average.
Energy subsidies alone may increase to $22 billion for oil-importing countries
The three experts noted that energy subsidies alone could increase by up to $22 billion for oil-importing countries in 2022.
This represents money that could have been spent on more targeted support or other priority measures. In addition to existing subsidies, some countries have introduced measures to mitigate the impact of higher prices, such as direct transfers and lower tariffs on food, which will increase fiscal costs.
They considered it urgent for countries to address food security risks and mitigate the impact of high international prices on the poor. They explained that the most effective way is to ensure that vulnerable families are protected through targeted, temporary, and transparent transfers.
For countries with high debt, these measures should be accompanied by balancing measures elsewhere – for example, cutting unnecessary spending, or promoting additional tax fairness, or a combination of both – to protect debt sustainability with limited fiscal space.
