ANALYSIS Middle East's $2trn wealth could be over in 15 years: IMF

[BetterDaysAhead]

The Arab monarchies of the Persian Gulf's $2trn of government financial wealth could be gone by 2034 if current fiscal measures aren't ramped up, as oil demand nears peak levels, the International Monetary Fund said in a report.

The six-nation Gulf Cooperation Council (GCC) accounts for over one fifth of global oil supply, but economies in the region have been hit hard by a drop in oil prices in 2014 and 2015. Global oil demand may start falling sooner than expected, putting a strain on the finances the IMF warns.


"Global oil demand will peak around 2041 at about 115 million barrels a day and gradually decline thereafter as the demand-reducing effects of improvements in energy efficiency and increased substitution away from oil begin to dominate the weakened positive impact of rising incomes and population," the IMF said in a report, citing a benchmark projection.

The expected speed and size of these consolidations in most countries may not be sufficient to stabilize their wealth"

Gulf states have for decades used their energy wealth to provide millions of citizens with government jobs, part of a social contract by rulers that rewards political acquiescence and educational attainment with employment for life.

But high-paying public sector jobs that demand little of workers have translated into low productivity and an entitlement culture, as well as rising costs as populations grow.

"At the current fiscal stance, the region's existing financial wealth could be depleted in the next 15 years," it said.

Gulf countries are trying to implement reforms and diversify their economies to lower dependence on oil income. Several countries have introduced taxes, including VAT and excise taxes, to shore up government revenue. These reforms may be too little too late, according to the IMF.

"All GCC countries have recognized the lasting nature of their challenge ... However, the expected speed and size of these consolidations in most countries may not be sufficient to stabilize their wealth," it added.

Kuwait - which has one of the world's biggest sovereign funds - could need some $180bn in financing over the next six years in the absence of more drastic fiscal measures, the IMF said last month. Saudi Arabia expects a deficit of $50bn this year.

Middle East's $2trn wealth could be over in 15 years: IMF

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[BetterDaysAhead]

 

[Yahya]

Very short sighted. Mean while if pl or Somalia sell 30bn barrels a year at $45 we could make 5 trillion in oil wealth by 2030 and put that towards pension funds for our citizens and circulate the money back into the economy, infrastructure projects and Green energy investments.

 

[BetterDaysAhead]

Very short sighted. Mean while if pl or Somalia sell 30bn barrels a year at $45 we could make 5 trillion in oil wealth by 2030 and put that towards pension funds for our citizens and circulate the money back into the economy, infrastructure projects and Green energy investments.

if we ever get oil wealth we should heavily invest in on innovations in diverse service and industry sectors and top quality education

 

[motivation]

in 15 yrs shabab will loose its funding

 

[DR OSMAN]

Very short sighted. Mean while if pl or Somalia sell 30bn barrels a year at $45 we could make 5 trillion in oil wealth by 2030 and put that towards pension funds for our citizens and circulate the money back into the economy, infrastructure projects and Green energy investments.

The whole world consumes 30-35 billion barrels a year, are u saying the world will allow one nation centralize the production outputs? what about Russia and OPEC who manage each nation production output so it doesn't lead to an over supply, your not the greatest economist, but maybe @Farjano-Walad can comment on this ludicurous idea of one nation producing 30 billion barrels of oil a year and how crazy it would be to centralize the world oil to one nation.

 

[Yahya]

The whole world consumes 30-35 billion barrels a year, are u saying the world will allow one nation centralize the production outputs? what about Russia and OPEC who manage each nation production output so it doesn't lead to an over supply, your not the greatest economist, but maybe @Farjano-Walad can comment on this ludicurous idea of one nation producing 30 billion barrels of oil a year and how crazy it would be to centralize the world oil to one nation.

It sound farfetched but we are not apart of OPEC so they cannot regulate or enforce how much oil we sell each year. As for over production issues, the world consumes that much a year but you must take into account that some nations keep some purchased barrels in reserve.

 

[butANumba]

Everyone keeps forgetting there is a whole world outside of these (western countries) So many third world countries will still be using oil for the next 50 years.

 

[Royalflush]

All they had to do was tax their overweight citizens a bit more and they would’ve survived for a lot longer. With shale oil technology rapidly improving in the US and Bidens tough stance on Saudi human rights, I’d say the US is almost in dependant of reliance on opec.
I believe they won’t be destroyed by their horrendous fiscal planning, but by USA and Iran, the Arabs will pick sides in a new conflict and the rest of the oil money will drain away