International Monetary Fund (IMF) has said on February 6 that Arab monarchies of the Persian Gulf can lose their wealth of $2 trillion within the next 15 years as oil demand nears peak levels. The recent report released by the IMF has predicted that global oil demand may start falling sooner than expected. This will further cause a strain on the finances of the six-member Gulf Cooperation Council which accounts for a fifth of the world's crude production.
Preserving the GCC’s financial wealth will require greater saving, smarter spending , and raising new sources of revenue. Read the report #FutureofOil https://t.co/ypIAMyp8XN pic.twitter.com/xIetm4EUoo— IMF (@IMFNews) February 6, 2020
In other words, the IMF has suggested that without decisive economic reforms, the richest countries in the Middle East could deplete their net financial wealth by 2034 and the region will become a net borrower. Furthermore, within the next ten years, their non-oil wealth would also be exhausted. Jihad Azour, director of the IMF's Middle East and Central Asia Department, reportedly said in an interview that the countries in the region need to think strategically and in long-term basis as the 'oil market is changing structurally' from both, demand as well as supply side.
According to Azour, the development plans need to shift spending and job creation from the governments to private businesses while creating other non-oil sources of income, quickly. The report has also predicted that GCC countries would have to be more aggressive in order to achieve an economic transformation to preserve the existing wealth. International oil companies, producing states have acknowledged the eroding of oil demands due to alternative energy sources with greater efficiency.
International media reports have also stated that Gulf producers like Saudi Arabia and the United Arab Emirates are currently developing new industries in order to prepare for a post-oil era. However, IMF believes that they are not moving quickly enough to avoid the depletion of their funds. The countries in the region sharply increased their budget spending from 2007 till 2014 when the crude plunged. The regional governments are likely to cut their spending further to make the ends meet.