'brighter Prospects' For Oil, Gas Exporters, Says Imf

The International Monetary Fund (IMF) stated Wednesday that the prospects for oil and gas exporters in the Middle East and North Africa (MENA) have improved, but that the Caucasus and Central Asia face a particularly difficult future due to their ties to Russia and Ukraine.

The IMF observed that the crisis in Ukraine and sanctions on Russia are worsening the divergence in recovery prospects for the Middle East and Central Asia in its April 2022 Regional Economic Outlook, Middle East and Central Asia, titled "Divergent Recoveries in Turbulent Times."

Despite higher and more volatile commodity prices, rising inflationary pressures, faster-than-expected monetary policy normalization in advanced economies, and a lingering pandemic, the economic environment in 2022 is defined by extraordinary headwinds and uncertainties, particularly for commodity importers. A longer confrontation with Russia and further sanctions, tighter-than-expected global financial conditions, probable de-anchoring of inflation expectations, a harsher recession in China, and new pandemic breakouts are all potential downside risks.

Economic diminishing macro policy room to react to shocks and excessive debt and inflation, policymaking has become increasingly difficult. To handle uncertainties, preserve macroeconomic stability, and assist the recovery, policies will need to be carefully tuned to national conditions while protecting the most vulnerable and guaranteeing food and energy security. To avoid scarring from the virus and the war and to achieve an inclusive recovery, structural reforms have become even more critical.

Higher oil output in accordance with the Organization of Petroleum Exporting Nations and Other Major Oil Producers (OPEC+) agreement, higher-than-expected oil prices, and effective mass immunisation efforts in various countries would benefit oil exporters.

GCC growth is expected to accelerate from 2.7 percent in 2021 to 6.4 percent in 2022, up 2.2 percentage points from October, owing to upward revisions for Saudi Arabia (2.8 percentage points) and, to a lesser extent, other economies (Kuwait, Oman, UAE), which reflect higher oil production in line with the OPEC+ agreement, base effects, and a recovering non-oil sector. Despite a slight decline from 2021, non-oil GDP in the GCC is predicted to increase at a strong rate in 2022-23 (about 34-12 percent).

As oil GDP begins to decline after 2022, this will help to keep these economies on track. In other MENA oil exporters, country-specific factors will play a role in 2022: activity in Algeria will be supported by the expected normalization of rainfall following the drought in 2021, and growth in Iran will slow from 4% in 2021 to 3% in 2022. (An upgrade of 1 percentage point, reflecting higher oil production and exports to China, and assuming that US sanctions remain in place).

From 4.4 percent in 2021 to 2.3 percent in 2022, CCA oil exporters' growth is likely to decelerate significantly. The lower growth forecast for Kazakhstan in 2022 reflects the impact of tighter monetary policy and greater inflation on domestic demand, while the lower growth forecast for 2023 includes delays in the Tengiz oil field expansion. The outlook for inflation varies for every oil exporter.

Despite the improvement, inflation in GCC nations is predicted to reach 3.1 percent in 2022, up from 2.2 percent in 2021. High inflation, on the other hand, is an issue outside of the GCC. For example, inflation in Iran and Iraq has been revised up by 4.8 and 2.4 percentage points, respectively, to 32.3 and 6.9 percent in 2022, capturing the pass-through from currency depreciation and permissive monetary and fiscal policies (Iran) and greater imported inflation (Iraq) (Iraq).

Inflation among CCA oil exporters is predicted to average 10.4 percent in 2022, with Azerbaijan leading the way with a broad-based price increase.

The fiscal and external balances are likely to improve as a result of rising oil prices. Oil revenues are expected to climb by 5.3 percentage points of GDP on average between now and 2021, totaling USD 818 billion (an upward revision of USD 320 billion compared to October). The current account deficit is forecast to narrow to 12.2% of GDP (an upward revision of about 8.7 percentage points compared to October).

Official reserves are estimated to rise to USD 1.3 trillion in 2022 as a result (an upgrade of about USD 235 billion). The majority of oil exporters are anticipated to strengthen their budgetary reserves. Except for Algeria, Iraq, Qatar, and the United Arab Emirates, non-oil primary balances are expected to improve by an average of 2.8 percentage points of GDP for most oil exporters, reflecting a sharp slowdown in non-oil GDP (Iraq) and higher primary expenditure for Algeria, Qatar, and the United Arab Emirates. As a result, several nations' expansionary fiscal policies following the pandemic are predicted to reverse, with non-oil primary fiscal balances expected to improve from pre-pandemic levels (Azerbaijan, Bahrain, Oman, and Saudi Arabia).

In 2022, debt levels are forecast to fall to 34.6 percent of GDP (a 2.8-percentage-point decrease), and public gross finance requirements are expected to fall by USD 463 billion compared to 2020-21, resulting in a USD 92 billion deposit accumulation in 2022-23. -KUNA

 

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