High Commodity Prices Hit Middle East’s Oil Importers

While oil exporters in the Middle East enjoy a windfall of revenues from high oil and gas prices, oil importers in the region will struggle with high food, crude, and fuel prices, the International Monetary Fund (IMF) said on Tuesday.

Following the war in Ukraine, commodity prices have surged, and the weak developing economies in the Middle East and North Africa, which are importers of oil and fuels, are feeling the pinch, Jihad Azour, the Director of the Middle East and Central Asia Department at the IMF, and Senior Economists Jeta Menkulasi and Rodrigo Garcia-Verdu wrote in a blog post.

The IMF expects oil prices to average $107 per barrel this year, up by $38 a barrel from the average last year. At the same time, food prices are set for another 14-percent increase in 2022 after reaching highs last year.

“Commodity price increases will also have a significant negative impact on oil importers’ external accounts. We project that these countries’ current account balances will deteriorate by 1 percentage point of GDP, on average. For low-income countries, higher wheat prices alone will be a significant blow, worsening current accounts by around 1.2 percent of GDP on average,” IMF’s economists wrote.

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In its recent Regional Economic Outlook, the IMF revised up its forecast for growth in the Middle East and North Africa by 0.9 percentage points to 5 percent, but this reflects improved prospects for oil exporters, thanks to rising oil and gas prices.

“The oil windfall would help cushion the war’s effect on oil exporters,” the IMF said in the outlook released last month.

“Oil exporters will see better prospects because of higher oil production in line with the Organization of Petroleum Exporting Countries and other major oil producers (OPEC+) agreement, higher-than-expected oil prices, and successful mass vaccination campaigns in several countries,” the fund noted.

For example, oil revenues at the world’s top crude oil exporter, Saudi Arabia, are expected to surge by 66 percent this year to around $249 billion, Riyadh-based Jadwa Investment said earlier this month.

For the first quarter alone, Saudi Arabia recorded its highest economic growth rate in the last ten years, at 9.6% compared to the same quarter of 2021, according to flash estimates by the General Authority for Statistics, which attributed the growth to oil activities and exports.

By Tsvetana Paraskova for Oilprice.com

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