The International Monetary Fund expects energy exporters in the Middle East and Central Asia to earn a cumulative windfall of about $1 trillion over 2022-2026, a bonanza that will go a longer way for Gulf Arab economies because they’ll save a lot more of their oil revenues.

The influx of petrodollars would be more than projected by the IMF a year ago, a reflection of higher crude prices even as fears of a recession are dragging oil down in the second half of the year. Saudi Arabia and five other members of the Gulf Cooperation Council, already among the biggest winners in emerging markets, will benefit even more since they may save about a third of their oil revenues, according to the fund.

It’s “a significantly higher saving rate relative to those that breached into negative territory following past declines in oil prices, a stark contrast to the pro-cyclical fiscal policies of the past,” the IMF said in its regional economic report published Monday.

Disruptions in trade and output after Russia’s invasion of Ukraine in February have driven up the cost of commodities, contributing to cost-of-living crises around the world and keeping oil above $100 a barrel for much of the year.

But for the large producers in the Middle East, the oil boom has had the effect of pushing budgets into the black for the first time in years, helping bankroll spending and allowing some to repay debt early. 

The average current-account surplus for Gulf nations is expected at nearly 10% of gross domestic product in 2022, almost double last year’s level and on track to reach 7.8% in 2023, according to the fund.

The divergence with energy importers is now especially striking. The region’s emerging market and middle-income economies, including Pakistan, will see an increase in external financing needs this year to 242% gross international reserves, or $275 billion, from 109% in 2021.

Bigger Buffers

“Broadly speaking, all countries need to start adjusting by increasing their buffers,” Jihad Azour, the IMF’s director for the Middle East, North Africa and Central Asia, said in an interview on Sunday. “The region is still recovering and both oil exporters and importers are showing a higher level of growth than the global growth.” 

The pace of economic expansion in the GCC will likely more than double from last year and reach 6.5% in 2022 -- just slightly higher than the IMF’s forecast in April -- helping push GDP growth across the Middle East and North Africa to 5%. 

In anticipation that crude prices will be lower next year, the IMF sees GDP growing 3.6% both in the Gulf and the broader Middle East.

With high inflation, rising interest rates, a global energy crisis and tightening credit markets, petrowealth in the Gulf has become more important than ever as a source of capital.

In the case of Saudi Arabia, its sovereign wealth fund has been channeling billions of dollars into stock markets and assets globally while playing an increasing role in financing development at home.

In the report, the IMF warned that “although general governments in oil exporters are expected to avoid the procyclical responses of the past, there is a risk that other public entities such as state-owned enterprises and sovereign wealth funds spend the oil windfall.”

International reserves in the nations comprising the GCC -- Saudi Arabia, the United Arab Emirates, Qatar, Kuwait, Bahrain and Oman -- will amount to nearly $843 billion this year and grow to more than $950 in 2023, the fund estimates.

Stronger non-oil growth in the GCC, where much of the expatriate labor force consists of people from countries such as India and Pakistan, could support the transfers of money home by workers, according to the IMF. It predicts growth in remittances from the Gulf to the region’s poorer economies at between 1.9% to 3.4% annually in the medium term.

“Oil-exporting countries grew over the last couple of years not only because of the increase in oil prices and production but also because of the increase in the non-oil sector,” said Azour. “Improving their fiscal management, anchoring it into the medium-term will allow the state to be less dependent on oil money to finance itself.”