Mideast economies take massive hit with oil price crash

BAGHDAD (AP) — Iraq is planning painful cuts in social benefits relied on by millions of government workers. Saudi Arabia will likely have to delay mega-projects. Egypt and Lebanon face a blow as their workers in the Gulf send back less of the much-needed dollars that help keep their fragile economies afloat.

The historic crash in oil prices in the wake of the coronavirus pandemic is reverberating across the Middle East as crude-dependent countries scramble to offset losses from a key source of state revenue — and all this at a time when several of them already face explosive social unrest.

The economies of all the Arab Gulf oil exporters are expected to contract this year, as much as 5% in Iraq, according to the International Monetary Fund.

While some Gulf countries can rely on a cushion of foreign currency reserves, nowhere in the region are the circumstances more dire than in Iraq, where oil sales fund 90% of the state budget.

Iraq saw massive protests in the past months by a populace angry over the weak economy and rampant corruption — and the turmoil could erupt again. Cutbacks in spending will only add to the pain for a population struggling to get by under coronavirus restrictions. In the capital’s Tahrir Square, protesters are still camped out, determined not to let their movement die.

“Coming into summer the conditions are developing for a perfect storm for the government,” said Sajad Jiyad, an Iraq-based analyst.

Oil is currently trading at $20 per barrel, dipping even lower some days to levels not seen since 2001. Further constraints will be felt as an OPEC agreement to cut production levels by 23% to stabilize the oil market takes hold. May and June are expected to be particularly difficult as that is when oil storage space will be full,...