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Mon, Feb 09, 2009 - Page 10 News List

Middle Eastern oil producers may lose US$300 billion to financial crisis: IMF


The sun sets over oil facilities in Sakhir, Bahrain, on Saturday. OPEC members are expected to cut oil production when they convene next month. OPEC cuts so far have failed to stop rapidly falling oil prices.


Middle Eastern oil-exporting nations may lose US$300 billion in revenue because of lower crude prices and production cuts prompted by the global financial crisis, the IMF said.

Economic growth for the 12 crude producers will slow to 3.6 percent this year from 5.6 percent last year, IMF Middle East and Central Asia Department director Masood Ahmed said yesterday in Dubai. Oil export receipts are likely to drop 50 percent.

Oil prices have fallen almost 75 percent from their July high as the global economy sank into recession, straining budgets of crude exporters. Most are expected to tap into their oil savings to maintain spending and avoid recession.

Saudi Arabia said it would post a 65 billion riyal (US$17 billion) deficit this year.

Growth in the six Gulf Arab states, which includes Saudi Arabia, Kuwait, the United Arab Emirates, Qatar, Oman and Bahrain, will slow to 3.5 percent from 6.8 percent, while inflation will decline to 6.3 percent, Ahmed said.

“If oil exporters cut their long-term oil price expectations and, consequently, their spending, growth prospects would be weaker for the entire region,” Ahmed said.

Some financial institutions in the region may be “under stress” if asset price corrections deepen.

The IMF classes the oil exporters of the Middle East as Algeria, Bahrain, Iran, Iraq, Kuwait, Libya, Oman, Qatar, Saudi Arabia, Sudan, the Emirates and Yemen.

The account surplus of US$400 billion among the oil exporters will turn into a deficit of US$30 billion this year, Ahmed said.

“For most countries, this deterioration is from a position of significant strength and thus can comfortably be sustained,” he said.

Oman has said it would record a budget shortfall of 810 million rials (US$2.1 billion), while Dubai forecasts a shortfall of 4.2 billion dirhams (US$1.1 billion).

“The global slowdown will clearly have a significant impact on growth through lower exports, tourism, remittances and higher cost of credit,” Ahmed said.

Continued spending by oil exporters will soften the blow as emerging markets have limited opportunity for counter-cyclical spending, he said.

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