For full coverage of Middle East business developments, see MEED
The IMF has revised down its oil price forecast for 2016 in its annual Article IV report on the economy of Kuwait released today.
It shows the average price of Kuwaiti oil exports falling to $51 a barrel from a projected $52.7 a barrel this year.
Previous IMF reports have forecast the oil price would rise in 2016 to around $60 a barrel. This appeared to be based on the assumption world oil demand would rise, non-OPEC production would fall and OPEC would agree market-stabilisation measures.
Instead, world oil demand has risen more modestly than assumed, non-OPEC output has fallen by less than expected and OPEC’s failed to act to contain downward pressure on prices.
The price of the OPEC basket of crude oils was $39.3 a barrel on 1 December compared with more than $51 a barrel at the end of 2014. Its average price so far this year is $51.3, which is 47 per cent lower than it was in 2014 as a whole. This is the biggest absolute fall in prices in oil industry history.
The IMF’s Article IV report shows Kuwait’s GDP in dollar terms at current prices has fallen by 26 per cent in 2015 to $122bn. The budget surplus has fallen by 84 per cent and the current account surplus by 77 per cent to $12.5bn.
The IMF forecasts Kuwait’s oil production will rise to 2.89m b/d in 2016 from 2.83m b/d in 2015. Nominal and real GDP is forecast to grow in the year to come, while budget and balance of payments surpluses will continue but at a lower level.
The IMF said it had called for fiscal consolidation through measures to increase non-oil revenue, cuts in spending and reforms in subsidies and public sector wages. It said it supported Kuwait’s plans to introduce VAT and a business profits tax.
“Directors also recommended combining domestic and external financing sourxes to maintain capital spending and preserve the social safety net,” an IMF press statement released with the report said.
You can see the full report here.