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Cheap oil will have mixed effect on the Maghreb

Monday, March 23, 2015

Subject

Low oil price impact on Maghreb states.

Significance

With oil futures markets indicating that crude will remain around 60 dollars a barrel in the foreseeable future, the sharp fall in oil prices since mid-2014 will continue to have a profound impact on the economies of the Maghreb. Oil producing Algeria must confront a serious deterioration in its revenues, but oil importing Morocco gains from the dramatic cut in its import bill. Tunisia will feel an easing of the pressure on its fiscal and external accounts. However, the price fall compounds the damage to Libya of significant production stoppages.

Impacts

  • Algeria's abundant financial reserves will enable it to cope with high fiscal and external deficits for a few years.
  • The Moroccan economy is set to achieve growth rates of 4.5-5.0% over the next two years.
  • Tunisia's external accounts will benefit from decreased import costs, which should help lessen the pressure on foreign reserves.
  • The massive cut in Libya's export revenues increases the risk of a currency crisis.
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