By Femi Adekoya
The coronavirus crisis will see global oil demand dropping by around
eight percent this year, compared to last year, the
International
Monetary Fund (IMF), has said in a new report.
This year, oil prices will be 41 percent lower than in 2019, the IMF
said in its ‘Global imbalances and the COVID-19 crisis’ external report.
The direct impact of the low oil prices on oil trade balances will vary
across economies, reflecting their dependence on oil exports and
imports, according to the IMF.
The Fund’s estimates for this year’s global oil demand decline are in
line with other forecasts such as the International Energy Agency (IEA),
and Organization of the Petroleum Exporting Countries (OPEC).
The Fund said the COVID-19 pandemic has caused a sharp decline in global
trade, lower commodity prices, and tighter external financing
conditions. At a global level, the latest IMF staff forecasts for 2020
imply a modest narrowing in current account surpluses and deficits by
some 0.3 per cent of world gross domestic product (GDP), although
subject to high uncertainty.
Last month, the IEA said in its latest Oil Market Report that global oil
demand was set to crash by 7.9 million barrels per day (bpd) this year,
which was slightly more optimistic than last month’s expectation of an
8.1-million-bpd demand drop.
The IEA, however, noted that the recent rise in COVID-19 cases and the
reinstating of partial lockdowns in some countries continue to
contribute to the uncertainty surrounding the world’s global oil demand
in 2020.
This year, the world is expected to consume an average of 92.1 million
bpd of oil, compared to the typical demand of 100 million bpd, the IEA
said.
OPEC, on its part, expects overall global oil demand to drop by 8.9
million bpd in 2020, before rising by 7 million bpd in 2021, when it
will still be lower than demand in 2019.
The oil price plunge and the production cuts after the coronavirus
pandemic will hit oil exporters in the Middle East and North Africa
(MENA) hard, with the combined oil income for those countries expected
to plummet by $270 billion this year compared to 2019, the IMF said in
its latest update on the region last month.
On the impact of remittances balances, the IMF noted remittances are
highly vulnerable to the COVID-19 crisis because migrant workers are
typically more exposed to the risk of unemployment and wage losses
during recessions than are native workers. Migrant workers also work
disproportionately in such sectors as food and hospitality, retail and
wholesale, and tourism and transportation, which have taken a hit from
the crisis.
The decline in remittance inflows in percent of GDP is expected to be
concentrated among a number of emerging market and developing
economies. Citing World Bank data, IMF said World Bank 2020 forecasts an
average 20 percent fall in remittance flows in 2020, based on an
empirical model that links remittance inflows to migrants’ incomes
proxied by the nominal per capita incomes of the migrants’ economies of
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