The head of the International Monetary Fund has said that the business model of oil producers has been completely changed and disrupted by the drop in prices.
On stage at the Global Women’s Forum in Dubai today, Christine Lagarde, who was re-elected managing director of the fund for a second five-year term last week, said that emerging markets economies with the exception of India were either slowing down or in a weak position.
“The low-income countries as well as the commodity producers, particularly the oil exporters, are facing a completely new reality where the price of commodities, essentially oil but also metals and food, are going down and have gone down significantly to actually change and disrupt the business model of those countries,” she said.
Yesterday at a conference in Abu Dhabi, Lagarde urged Gulf Cooperation Council countries to reduce state spending further and implement taxes to cope with the period of low oil.
“GCC economies have made large fiscal adjustments in the past, and I am confident that they can do it again,” she said.
Oil prices have plunged around 70 per cent since the summer of 2014, with Brent crude standing at just under $34 a barrel today.
Exporters in the Middle East and North Africa lost more than $340bn in revenues last year, equal to 20 per cent of their combined gross domestic product, according to IMF estimates.
Today, Lagarde reiterated that the global economy was in a tepid recovery phase, with global growth of 3 per cent expected this year, compared to 3.1 per cent in 2015.
She praised the UAE for the “incredibly great job” the country was doing in empowering and pushing women and said the country had set standards for other countries.
But she also warned that in 90 per cent of the IMF’s 143 members countries there were still rules stopping women from having the same rights, access to education and access to finance as men.