Export receipts in Middle East and North Africa (Mena) oil exporters have declined by $390bn last year, which represents 17.5% of their GDP in 2015, an IMF report yesterday showed. 
Despite a partial offset from reduced imports owing to subdued prices of non-oil commodities, the combined current account of the GCC (Gulf Cooperation Council) and Algeria has reversed from a comfortable surplus to a projected deficit of about 8% of GDP in 2016. 
The deficit of other Mena oil exporters is projected to be 4.75% of GDP this year, the International Monetary Fund said. 
The current account is expected to improve only gradually over the medium term, as the oil price recovers somewhat and fiscal adjustment unfolds. Mirroring the large loss in export receipts, fiscal balances have deteriorated considerably. The ample surpluses of the GCC countries and Algeria have turned into significant deficits, projected to average 12.75% of GDP (Gross Domestic Product) in 2016 and remain at 7% over the medium term, despite the implementation of sizeable deficit-reduction measures. 
For other Mena oil exporters - those generally less reliant on oil but with smaller fiscal buffers - the combined deficit is projected to average 7.75%  of GDP in 2016, and gradually close by the end of the decade as oil output increases and conflicts are assumed to ease.
“The outlook for lower oil prices implies weak oil revenues for years to come, dramatically reducing the capacity of governments to spend,” the IMF said. 
Oil prices have shed some 70% from their mid-2014 peak value to $40 a barrel. The IMF said markets expect prices to recover modestly to $50 by the end of this decade.
Over the past decade, Mena oil exporters enjoyed large external and fiscal surpluses and rapid economic expansion on the back of booming oil prices. However, with oil prices plunging in recent years, surpluses have turned into deficits and growth has slowed, raising concerns about unemployment and financial risks. 
The oil price drop since mid-2014 has been spectacular: Prices have fallen nearly 70% to about $40 a barrel. Futures markets anticipate oil prices to recover only modestly to $50 a barrel by the end of this decade, though much uncertainty surrounds this forecast.
The weak price prospects reflect the expectation that global oil supply growth will moderate only slowly as Iran boosts its exports and other Mena oil exporters maintain high output, at a time of sluggish global growth.
“For most Mena oil exporters, the fiscal adjustment needed to absorb the oil price shock is unprecedented,” the IMF said. 
Last year, many countries adopted significant deficit reduction measures, while drawing down financial buffers, where available, or borrowing to smooth the adjustment to lower oil prices.
The bulk of this adjustment has so far comprised spending cuts, however, new sources of revenue are also being considered. Algeria, Iraq, the UAE, Saudi Arabia, and, to a lesser extent, Oman have focused on capital spending cuts. 
Current spending reductions are an important part of the adjustment process in Bahrain, Oman, and Qatar, the IMF added.


‘5% VAT could lift 
Gulf GDP by 1.5%’


Revenues measures by way of value-added tax (VAT) can contribute to lifting the GDP of the GCC countries, IMF has said. 
For example, introducing a 5% VAT could raise about 1.5% of GDP, the International Monetary Fund said in its Regional Economic Outlook yesterday. Revenue efforts should focus on designing broad-based tax systems, it said and noted that the GCC is planning to introduce a VAT in the coming years.
New revenue measures are being taken in Oman (an increase in the corporate income tax), Bahrain (tobacco and alcohol taxes), and Iran (reduced exemptions and better tax administration), the report said.