The oil exporting countries of the Middle East and North Africa (Mena) region face the risk of fiscal deficits in 2016 unless more action is taken to trim rapid spending growth and the bloated public sector, the Washington-headquartered IMF has warned.
Rising government spending has led to an increase in the oil price required for most states in the region to avoid fiscal deficits. This breakeven oil price is now getting closer to the actual price of oil, making exporters increasingly vulnerable to a drop in oil markets.
The IMF estimates the breakeven oil price for most oil exporting countries in the Mena region is now close to or above $100 a barrel. In 2014, it is estimated to be $116.8 a barrel for Bahrain, $83.6 a barrel for Saudi Arabia and $70.7 a barrel for the UAE.
As a result of this, the IMF is warning that governments need to take further measures to create private-sector jobs and stop relying on public sector employment.
Since the onset of the Arab uprisings in early 2011 job creation has become a major policy goal for governments around the region. Despite this, not enough is being done. On current trends, the GCC faces a gap of about 1 million jobs by 2016, according to the IMF. In the GCC, there have been a large number of jobs created in the private sector, but most are going to expatriates, says Masood Ahmed, director of the Middle East Department of the IMF.
Ahmed added that for oil importing countries in the region, such as Egypt, Jordan and Tunisia, an economic recovery from the financial crisis of 2009 would be delayed again as a result of political unrest and a weak global economic recovery. The challenges to these countries are becoming even more acute, says Ahmed. An additional 1.5 million people are unemployed because of the political unrest and weak economies in these countries, the IMF says.