Oil prices are not expected to rise much next year, and will stay in the $40-50 a barrel range, putting additional pressure on the oil exporters in the Middle East, the International Monetary Fund (IMF) said on Monday in its update on the Regional Economic Outlook for the Middle East and Central Asia.

Gross domestic product in the region is set to drop by 4.1 percent this year, a downward revision of 1.3 percentage points compared with IMF’s forecast in April 2020. The economies in the oil exporters in the Middle East and North Africa are expected to suffer more and shrink by 6.6 percent this year, according to the IMF.

The six countries in the Gulf Cooperation Council (GCC)—Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates (UAE)—will see their economies slump by 6.0 percent in 2020, before rising by 2.3 percent in 2021.

In Q2, the economy of Saudi Arabia shrank by 7 percent, with the unemployment rate hitting a record high as the combined effect of the oil price crash and the coronavirus pandemic hit the world’s largest oil exporter hard. Related: China’s Oil Imports Are Falling

Subdued prospects for global recovery and subdued oil prices will continue putting pressure on current accounts of the Middle East oil exporters, the IMF said. Downside risks continue to prevail and clouds the outlook, the fund added.

“In the near and medium term, oversupply and large inventories remain concerns, while demand continues to be dampened by low air traffic volume (despite recovering road traffic). Oil futures curves indicate that prices are expected to increase toward $48 a barrel in the medium term (from $41 for 2020), remaining some 25 percent below the 2019 average,” the IMF noted.

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“The projections for oil prices are in the corridor between $40 to $45 for … early next year, and will be between $40 to $50” on average in 2021, Jihad Azour, director of the IMF’s Middle East and Central Asia department, told CNBC on Monday.

The fiscal breakeven price of Saudi Arabia, for example, is $78.20 a barrel for 2020, the fund has estimated.

By Tsvetana Paraskova for Oilprice.com

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