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March 16, 2015

Washington, D.C., March 16, 2015 - The slump in oil prices will present challenges and opportunities for the Middle East and North Africa (MENA), according to the latest regional report by the Institute of International Finance (IIF).

"While overall growth in the oil exporting countries will moderate and their large fiscal surpluses will decline or shift to significant deficits, low oil prices may encourage these countries to accelerate and deepen structural reform efforts to improve energy efficiency and diversify their economies," said George Abed, senior counselor and director for Africa and the Middle East." Non-oil exporting countries in the region will benefit from the fall in oil prices through reduced oil import bills and lower fuel subsidies."

The IIF said that the 40 percent oil price drop from 2014 prices implies a massive shift in external and fiscal accounts. Exports from the MENA oil exporters will be reduced by $300 billion in 2015. For the Gulf Cooperation Council countries (GCC), the aggregated current account surplus will shrink from $266 billion in 2014 to about $40 billion in 2015, and the fiscal position will shift from a surplus of 4.6 percent of GDP to a deficit of 7.4 percent.

The IIF projected average growth in the Middle East and North Africa (MENA) region will pick up slightly from 2.8 percent in 2014 to 3.2 percent this year, driven by the recovery in Egypt, Morocco, and Iran.

The IIF reduced their growth forecast for the GCC by 0.4 to 3.4 percent in 2015.'  However, growth outside the oil sector will remain strong at 4.5 percent, only slightly lower than last year.

"If the oil slump continues beyond the near term, we expect most oil exporters to move more seriously towards a fiscal consolidation stance to avoid a significant rundown of foreign assets," said Garbis Iradian, deputy director for Africa and the Middle East. "Low-priority projects could be postponed or phased over time without impeding longer-term growth prospects or diversification efforts."

The IIF noted downside and upside risks to the outlook.'  On the downside, prospects remain heavily burdened by overarching security and geopolitical risks. Failure to reach an agreement by end-June 2015 between the P5+1 and Iran would have important regional repercussions.

In contrast, the IIF noted that risks on the upside are smaller. Global growth would lead to higher demand for oil and possibly higher production of crude oil in the region. Higher growth in Europe would also help revive trade with the Mediterranean countries of the region.'  Finally, an agreement between the P5+1 and Iran could ease geopolitical tensions and lead to a strong rebound in the Iranian economy.


The Institute of International Finance is the global association of the financial industry, with close to 500 members from 70 countries. Its mission is to support the financial industry in the prudent management of risks; to develop sound industry practices; and to advocate for regulatory, financial and economic policies that are in the broad interests of its members and foster global financial stability and sustainable economic growth. Within its membership IIF counts commercial and investment banks, asset managers, insurance companies, sovereign wealth funds, hedge funds, central banks and development banks. For more information visit www.iif.com.

Media Contacts

Dylan Riddle

Tel: +1 202.857.3626

Email: driddle@iif.com