DUBAI, United Arab Emirates -- Oil exporting countries in the Middle East lost $390 billion in revenue because of lower oil prices last year, and should brace for even deeper losses of around $500 billion this year, the International Monetary Fund said 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 year's end and the drop in revenue amounted to $30 billion more.
In a revised economic outlook report released Monday, the IMF said these countries will see revenue from oil exports drop even more in 2016, to between $490 billion to $540 billion compared with 2014, when oil prices were higher. Oil prices fell to about $30 a barrel in January compared with $115 in mid-2014.
IMF Director for Middle East and Central Asia Masood Ahmed said these losses translate into budget deficits and slower economic growth, particularly for Saudi Arabia, which is still heavily dependent on oil to finance its spending. Though the kingdom has been working on plans to overhaul its economy, oil still accounted for 72 percent of total revenue last year and Saudi Arabia projects a budget deficit of nearly $90 billion this year.
Saudi Arabia will see the biggest drop this year in the oil price needed to balance its budget as the government curbs spending.
The kingdom's fiscal break-even will fall to $66.70 a barrel from $94.80 in 2015, the IMF said. The 30 percent drop is the steepest among a group of Middle East and North African OPEC members reviewed by the IMF.
Saudi Arabia unveiled a plan on Monday for the post-oil era as it adjusts to the slump in crude. That blueprint, dubbed the "Vision for the Kingdom of Saudi Arabia," seeks to cut reliance on oil exports and will encompass economic, social and other programs, its architect Deputy Crown Prince Mohammed bin Salman, told Bloomberg News this month.
The prince is second in line to the throne, serves as the country's defense minister and chairs a committee formed soon after his father's ascension last year overseeing economic policymaking. That committee, the Council on Economic and Development Affairs, has been focused on reorienting the kingdom away from its heavy reliance on fossil fuels, creating jobs and increasing foreign investment.
In the wide-ranging interview, Mohammed bin Salman described the country as having become addicted to oil and said a planned partial initial public offering of the state-owned oil giant Saudi Aramco was part of the reform program.
He said that while there's been no final assessment on the value of Aramco, estimates have placed it at more than $2 trillion, and that less than 5 percent of Aramco would be offered to public shareholders. Subsidiaries of the company would also be part of the share sale, he said.
The Aramco shares would be listed on the Saudi stock exchange, known as the Tadawul, and on an international exchange, possibly in the United States.
"The vision is a road map of our development and economic goals," he said. "Without a doubt, Aramco is one of the main keys of this vision and the kingdom's economic renaissance."
Prince Mohammed's plan is addressing the biggest economic shakeup since the founding of Saudi Arabia in 1932, with measures that represent a radical shift for a country built on petrodollars. His drive may face resentment from a population accustomed to government largess and power circles stunned by the rapid rise of the 30 year-old prince, political analysts say.
"Shifting from an oil-based economy to something different is very difficult," said Gregory Gause, a professor at Texas A&M University. "The Saudis have been talking about it for decades, but have made little progress. So [Prince Mohammed] has his work cut out for him."
The IMF's Monday report said that economic growth in the six Gulf Cooperation Council countries of Saudi Arabia, Kuwait, Qatar, Bahrain, Oman and the United Arab Emirates will slow from 3.3 percent in 2015 to 1.8 percent this year. Saudi Arabia, the region's biggest economy, will see growth at just above 2 percent.
The IMF has encouraged reforms that would limit public spending on welfare programs and handouts that citizens in the Gulf have become accustomed to, such as lifting subsidies and tightening public sector wage bills to offset the impact of declining revenue. Already, most Gulf Cooperation Council countries have raised fuel, water, and electricity prices. Outside the Gulf Cooperation Council, oil exporter Algeria recently hiked fuel, electricity, and natural gas prices, and Iran increased fuel 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 The Associated Press.
The IMF 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 because of the fighting, bringing the total number of refugees to almost 5 million. The size of Syria's economy today, the IMF said, is less than half of what it was before the war erupted in 2011.
In Egypt, political turmoil has held back growth because of concerns over security. However, lower oil prices have reduced energy subsidy bills there.
Though Iran's growth was at zero in 2015, its economy is expected to grow 4 percent in 2016 and 3.7 percent in 2017 as it ramps up oil production and looks to increase trade and investment with the easing of international sanctions.
Information for this article was contributed by Aya Batrawy and Abdullah Al-Shiri of The Associated Press and Angelina Rascouet and Glen Carey of Bloomberg News.
Business on 04/26/2016