ISLAMABAD: Over 50 per cent decline in world oil prices will have significant consequences for economies of the Middle East and North Africa, according to a new World Bank report.

The report, ‘Plunging Oil Prices’, focuses on the implications of low oil prices for eight developing countries, or the MENA-8 (oil importers: Egypt, Tunisia, Lebanon and Jordan and oil exporters: Iran, Iraq, Yemen and Libya) and the economies of the Gulf Cooperation Council (GCC), who play a major role in providing funds in the form of aid, investment, tourism revenues and remittances to the rest of the countries of the region.

The report says that oil importers which are expected to gain include Jordan, Tunisia, Lebanon and Egypt.

The trade balances for these countries could improve by up to 2pc of GDP. The oil exporters will likely run larger fiscal and current account deficits or their surpluses will shrink substantially.

Yemen and Libya are among the most vulnerable oil producers while Iran and Iraq could experience a worsening of the oil trade balance (net oil exports) in excess of 10pc of GDP in 2015.

The oil-exporting countries of the Gulf Cooperation Council are in a much better position due to their ample reserves, but they too could endure over a $215bn loss in oil revenues, more than 14pc of their combined GDP.

Oil importers such as Egypt, Jordan and Lebanon face a risk as their economies receive large flow of remittances and aid from the GCC. However, based on previous episodes, the report concludes that lower oil prices will likely lead to slower growth, but not a decline in remittances.

The report says that plunging oil prices will have significant consequences for both oil exporters and importers in the MENA region.

Oil importers will see improvements in their current account through lower import bills; and fiscal account as the cost of fuel subsidies.

The economies of oil exporters could be hurt as oil accounts for more than half their budget revenues and export earnings. Fiscal spending has been on the rise in these countries and they will likely to run larger budget deficits or their surplus would shrunk substantially.

Their external accounts would also deteriorate, which could eventually put pressure on their currencies. However, the GCC exporters are in a much better position to cushion the impact of falling oil prices due to their ample reserves.

Published in Dawn, February 1st, 2015

On a mobile phone? Get the Dawn Mobile App: Apple Store | Google Play