The significant increases in oil prices this year will boost the monetary reserves of the Gulf countries, International Monetary Fund (IMF) said.
Jihad Azour, director of the Middle East and Central Asia Department at the International Monetary Fund, said that “the GCC countries reserves will rise between 300 and 350 billion dollars over the next three years, according to developments in oil prices.”
Azour explained that there is a revival process that we see in the Gulf economy for the current year, and “positive growth is expected in 2022.”
The Gulf economy depends heavily on oil revenues. These revenues have fallen sharply during the past year due to the pandemic that has paralyzed the global economy, and the demand for crude.
But securing COVID-19 vaccines, and the decrease in the number of HIV infections globally, contributed to returning the wheel of the global economy to a spin, and thus, increased demand for energy sources this year.
Oil prices have risen by more than 70% since the beginning of the year, and Brent crude is currently hovering around $83.35 a barrel, while US light crude is trading at $81.93 a barrel.
Azour reiterated the IMF’s previous calls for the Arab oil countries to continue diversifying the economy.
IMF’s position has always been focused on diversifying sources of income, and exiting from oil income sources gradually, with the least impact on the economic movement, he said.
In a related context, the credit rating agency Fitch said that the budget deficits of the Gulf countries will shrink during the coming period with the noticeable rise in oil prices.
Fitch indicated that oil prices and the improvement, to some extent, in the political stability contributed to building financial entities in the countries of the region.
The gradual return of global trade and tourism will brighten the economic prospects for a large part of the Gulf region, supported by the vaccination rollout and the easing of restrictions, Fitch said.
Fitch expected that Brent crude prices will average $63 per barrel in 2021 as a whole, accompanied by a further decline in OPEC+ production cuts.
This would contribute to a slight reduction in the budget deficit in Bahrain, Oman and Saudi Arabia, Fitch said.