COVID-19 and oil shocks raise Gulf recession risks

Significance

Lower oil and gas revenues are the major transmission channel of the global crisis to regional economies, but tourism, financial and professional services are also taking a major hit, undermining non-energy growth.

Impacts

• Even if austerity is modest at home, GCC countries may be stingier with support and pledges for regional partners.
• Non-Gulf Middle East oil producers Iraq, Algeria and Libya face an even greater fiscal challenge from rock-bottom prices.
• Iran will suffer less from lower oil revenues, which were already hit by sanctions, and more from non-oil trade blockages.