Fiscal and external breakeven oil prices are set to increase this year. This is due to both a fall in oil production as well as to increased government spending.
Investor sentiment towards oil exporters in the region will remain favorable due to elevated energy prices. Total capital inflows will remain modest in 2023, as sovereigns issue less debt due to continued fiscal surpluses. FDI will become the main conduit for nonresident capital inflows.
The result of higher oil prices is a shift in purchasing power from oil consumers to producers. Oil exporters are getting a boost to their terms of trade, leading to wider CA and fiscal surpluses. Higher energy prices will hurt several EMDEs that remain heavily dependent on petroleum imports.
The MENA region has weathered the economic storm from the health crisis. The economic recovery continues to gain momentum. Higher energy prices will improve the fiscal and current account positions in oil exporters. In oil importers, deficits, government debt, and unemployment will remain high.
The vaccine program, strengthening of energy prices, and end of the rift with other GCC countries will support the recovery in Qatar. We expect the current account and fiscal balances to shift to sizeable surpluses in 2021 and 2022.
GCC authorities took forceful steps to mitigate the fallout from COVID-19, and we expect a modest recovery in 2021 supported by higher oil prices. However, the region confronts an ongoing exodus of expats and decelerating growth of capital stock, underscoring the need for broad structural reforms.
Sovereigns are increasingly tapping capital markets to finance fiscal deficits. Private inflows to the MENA region continue to be dominated by Saudi Arabia, the UAE and Qatar. Resident outflows are declining but still exceed inflows. FDI remains subdued and concentrated in the energy sector.
Our MENA growth forecast stands at -0.3% with additional downside risks and high uncertainty over the duration of the shutdown and an additional potential fall on oil prices. We project recession in most oil exporters, the lowest growth in oil importers since the early 1990s, and wide twin deficits.
We have lowered our average Brent oil price assumption by $10/bbl to $54/bbl for 2020 due to lower global demand for oil. Such a decline exposes significant vulnerabilities among MENA oil-exporting countries, especially Oman and Bahrain. External and fiscal positions are expected to weaken.
Non-resident capital inflows to the MENA region are projected to rise from $165bn last year to $200bn in 2019 before moderating to $173bn in 2020. With the increasing inflows, inclusion into global indices, and ongoing reforms, the MENA region is becoming more prominent on the EM investment map.
We expect growth in the MENA region to slow to 1.4% in 2019 from 1.8% in 2018, dragged down by the deep recession in Iran and the compliance with the OPEC + deal. This aggregate picture, however, hides considerable heterogeneity in economic paths across the region.
We still expect Brent oil prices to average $65/b in 2019 and $62/b in 2020. Growth in non-OPEC supply combined with deceleration in global oil demand growth in 2019 and 2020, is offsetting upward pressure on oil prices from rising geopolitical tensions that could disrupt supply.
The GCC countries followed the Fed and cut their key policy rates, given their pegged exchange rates. Lower interest rates will encourage borrowing and stimulate non-oil growth, which has been weak in recent years. We expect non-oil growth to pick up from 2.1% in 2018 to 2.8% in 2019.
Ongoing geopolitical tensions have created headwinds, but Qatar’s economy has shown signs of resiliency. We expect growth to accelerate to 2.9% in 2019, driven by natural gas production and public investment. Exiting from OPEC sends a symbolic message that the country wants to chart its own course.
The Qatari economy continues to adjust to the effects of sanctions by some Arab countries. Given the large public foreign assets, Qatar is a strong po.
Saudi Arabia, UAE, Bahrain, Egypt, Jordan, and few other allied countries have cut diplomatic ties and transport links with Qatar, the largest LNG exp.
Qatar has been weathering the sharp fall in energy prices. Economic activity has moderated relative to the rapid pace of growth in recent years due to.
During our recent visit to Qatar, we were impressed by the robust, albeit moderating, pace of economic activity, reflecting the continued large spendi.
As the top LNG exporter and the eighth largest exporter of petroleum related liquids in the world, the collapse in oil and gas prices will have a mate.
Qatar's economy is continuing to grow rapidly following a smooth leadership transition in mid-2013. 2015 will mark the completion of major hydrocarbon.
In 2012, Qatar ended a six-year period in which real GDP growth was in double digits. LNG production has capped out at capacity, inducing stagnation i.