Price of oil to average $60 in 2020: IMF

Tough decisions will need to be made by oil producing countries, including increasing the oil of petrol and introducing Value Added Tax (VAT), to sustain the losses incurred due to the low prices.

The forecast by the International Monetary Fund (IMF) also estimates oil producing nations will incur $1 trillion in total losses, even as the average price per barrel is expected to reach $60 by 2020.

Speaking at the ongoing Arab Strategy Forum, Masood Ahmed, Director of the IMF’s Middle East and Central Asia Department, said: “There are big challenges that need to be met in 2016 – rising unemployment in the Mena region and the low oil prices that are impacting the economy.

“Tough decisions will need to be made by oil producing nations, such as the UAE, which has factored in by increasing the retail price of petrol; introducing VAT is also imperative to sustain the losses incurred.”

Ahmed highlighted the oil price was $100, oil producers recorded a budget surplus of $650 billion, saying: “Those were the high price days of oil. Now, those same nations are losing $1 trillion as deficit.

He continued: “In 2015, oil countries incurred $300bn loss in revenues, which was one fifth of their economy. Export earnings dropped by 20 per cent. The year 2016 is going to be just as tough.

“Oil price will gradually rise by 2020, but according to IMF forecasts, it will average only $60. Other sources of income will have to come into play.”