Oil price dynamics and energy transitions in the Middle East and North Africa: Economic implications and structural reforms

There is a widespread consensus that the sharp fall in the price of oil between 2014 and 2016 has had adverse effects on economic growth in the Middle East and North Africa (MENA) region. The consequences of the precipitous decline in the price of oil were particularly pronounced for the oil exporters. Because the price of oil and the government expenditures of the oil-exporting countries move in tandem, the drop in the price of oil weighed on the fiscal space of oil-exporters (International Monetary Fund, 2019a). The oil-exporting countries with limited fiscal buffers were particularly prone to the negative repercussions of the oil price shock of 2014 (International Monetary Fund, 2019b). Oil-importers in the MENA also did not reap the benefits of the drop in the price of oil due to lower remittances as well as to a slowdown in regional growth. In sum, the oil price shock proved to be a drag on the output growth of MENA’s oil exporting and importing economies (World Bank, 2016; International Monetary Fund, 2015a).