2018 & 2019 Economic Outlook for the Top Oil Producing Countries

Over a year since the OPEC deal to cap oil production was announced, we thought it would be interesting to take a look at the latest news and forecasts on oil prices and how top oil producing countries’ economies are performing in light of it all.



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As is often the case with the energy sector, crude oil has been at the forefront of the news of late. For the last few years the story has centered on the global crude oil price plunge that started back in mid-2014, eventually bottoming out in January of 2016, falling to the lowest level in over a decade. Uncertainty over the health of the global economy as well as the feared economic slowdown in China that began in mid-2015, led to a decline in global demand and consumption of oil. Oil producers continued output desperately trying to gain precious market share from others in the sector, even as prices continued to fall. An agreement to freeze production between major oil producers, speaheaded by Saudi Arabia and Russia, finally came to frution in late November of 2016, which caused oil prices to rally at the end of 2016 into 2017. 




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Prices were sent skyrocketing after the deal announcement was made and prices gradually increased throughout 2017, as members of the deal cut production in addition to a little help from increased political tensions in the MENA region during the year. The deal was later extended through December 2018 with oil prices steadily increasing. 

That OPEC members have proved compliant has surprised the markets, which had initially doubted they would adhere to the cuts. A substantial volume of oil has been taken off the market, however, the drop in global inventories has been slow, given rising U.S. stocks. The international agreement to cut crude output has reinvigorated rivals in the U.S. shale industry, which has undermined the efforts of Saudi Arabia and Russia. Indeed, some analysts have speculated that deal may be abandoned before December 2018, especially as internal conflicts between Saudi Arabia and Iran ramp up once again.

FocusEconomics analysts expect Brent crude oil prices to average USD 63.1 per barrel in Q4 2018 and WTI crude oil prices to average USD 59.6 per barrel in Q4 2018.

So, with all of the above said, how are the top oil producing country’s economies expected to perform this year amid all this news surrounding oil? Let’s take a look...

United States

Incoming data suggests that economic growth moderated slightly but continued at a healthy clip early this year. In January, employment data showed that solid hiring activity carried over from last year, which fueled an acceleration in annual wage growth to its highest figure since June 2009. Strong employment gains saw consumer sentiment moving further into positive territory in the month, while ISM data continued to point to robust momentum in the domestic economy. Weak spots in January data, however, included sequential declines in retail sales and factory output. On the political front, Congress enacted a budget agreement on 9 February that increases discretionary spending caps for FY 2018 and FY 2019 and suspends the federal government’s debt limit until March 2019.

An expected increase in federal outlays resulting from the budget deal should support growth this year and the next, an effect that will be compounded by the tax rewrite approved last December. Household spending is also projected to benefit from a sturdy labor market and solid housing gains, while business investment should remain resilient on fiscal stimulus and stronger global growth. FocusEconomics panelists see GDP expanding 2.6% in 2018, which is unchanged from last month’s estimate. In 2019, growth is seen moderating to 2.2%.

Read more on the U.S. economy


Incoming data suggests that Russia’s economic recovery was broadly steady in recent months, although growth likely remained lackluster. The manufacturing PMI fell to the lowest level since July 2017 in February, and the Ural oil price also lost some recent gains. However, industrial production expanded notably in January, after two months of contraction, while exports grew at a double-digit pace in December, the latest month for which data is available. Overall, the economy has come a long way since the 2015–2016 recession, and on 23 February, S&P Global Ratings upgraded Russia to investment grade status after three years at junk—raising the rating from BBB- to BB+ with a stable outlook. The move sparked a rally in Russian assets. Meanwhile, President Vladimir Putin is widely expected to win the 18 March election, ushering in a continuation of current economic policy.

FocusEconomics analysts trimmed their GDP forecasts this month, following a weaker-than-expected print for 2017. Limited oil production is expected to keep activity restrained this year, although the recovery is seen gaining modest steam from last year supported by low inflation, reduced interest rates and higher commodity prices. FocusEconomics Consensus Forecast panelists see GDP expanding 1.8% in 2018, which is down 0.1 percentage points from last month’s forecast. In 2019, growth is seen stable at 1.8%.

Read more on the Russian economy

Saudi Arabia

Volatility in financial markets, a strong U.S. dollar and surging oil production in the United States sent oil prices down in early February, threatening to derail the Kingdom’s economic recovery. Although oil prices are expected to remain relatively high this year compared to in 2017, Saudi authorities signaled that they will likely tap international bond markets for the third consecutive year in 2018, as early as March, to ease fiscal pressures. Meanwhile, Crown Prince Mohammed bin Salman continues to cement his political power following November’s massive crackdown on corruption that affected prominent businessmen, princes and top officials. On 26 February, the Saudi government announced that several top commanders had been removed, including the military chief of staff and the leaders of air and land forces.

The economy will benefit this year from higher oil prices compared to 2017 and strong global growth. Increased oil revenues will allow the government to adopt a more expansive fiscal stance. That said, persistent geopolitical threats and capped oil supply are expected to limit the economic recovery. FocusEconomics Consensus Forecast panelists expect growth of 1.6% in 2018, which is unchanged from last month’s projection. In 2019, growth is seen picking up pace to 2.3%.

Read more on the Saudi economy


November’s monthly GDP report showed an economy firing on all cylinders as motor vehicle production and non-conventional oil and gas extraction came back online following planned maintenance in September and October. Nearly broad-based growth across industries illustrated the health of the economy, and the firming up of goods- and services-producing industries bode well for an upbeat fourth quarter. January’s uptick in the unemployment rate rattled an otherwise strong labor market, but it was likely a one-off, spurred at least in part by recent minimum wage increases. NAFTA renegotiations will continue in Mexico City between 26 February–6 March, and a decidedly more optimistic tone has prevailed among negotiators—although all sides are still cautiously preparing for the pact’s unraveling. On 27 February, Finance Minister Bill Morneau will unveil this year’s federal budget, which could reportedly get a boost from last year’s economic tailwinds and tackle narrowing both the gender pay and workforce-participation gaps.

Economic fundamentals appear very solid, and the economy should grow at an upbeat pace this year on the back of the tightening labor market. Heavily indebted households are, however, expected to moderate their spending somewhat as interest rates continue climbing and the property boom loses some steam. The possible scrapping of NAFTA will loom heavily on the economy over the short term. FocusEconomics panelists expect GDP to grow 2.2% in 2018, which is unchanged from last month’s estimate, and 1.8% in 2019.

Read more on the Canadian economy


Iraq’s economic recovery appears to be gaining traction following years of civil war, quashed Kurdish ambitions for statehood and low oil prices. Political uncertainty, however, continues looming over the economy. This year’s budget, which failed to pass in late January when Kurdish and Sunni lawmakers skipped the vote, appears to have hit new roadblocks in the run-up to the 12 May parliamentary elections. There are reports Prime Minister Haider al-Abadi is trying to postpone a vote on the bill until after the election, to avoid meeting Kurdish demands before the country heads to the polls. In late February, as a precondition for any budget deal, Erbil reportedly agreed to Baghdad’s request to soon resume exporting oil to Turkey through a Kurdish pipeline.

Higher oil prices and victory over ISIL in Iraq are expected to lift economic growth prospects considerably this year. Large fiscal imbalances and rising sectarian tensions ahead of May’s elections will, however, keep a lid on growth. FocusEconomics panelists see expansion of 2.3% in 2018, up 0.2 percentage points from last month’s forecast. In 2019, they see growth at 3.6%.

Read more on the Iraqi economy


Although economic growth is moderating in SH 2017, which ends in March 2018, it remains strong on the back of resilient oil export growth amid higher prices for the commodity. In recent weeks, however, the slide of the rial against the U.S. dollar worsened, disrupting economic activity and adding upward pressure on inflation. The rial has been hit by concerns around the reinstitution of economic sanctions by the U.S., which triggered currency speculation in the parallel market. To restore the value of the rial, on 28 February the government introduced restrictions on the use of U.S. dollars and cracked down on illegal money changers in Tehran, arresting around 90 currency traders.

The economy is recovering following years of tough economic sanctions. However, large macroeconomic imbalances and fears the U.S. could reinstate sanctions are threatening to derail Iran’s economic recovery. FocusEconomics Consensus Forecast panelists see growth of 4.2% in SH 2018, unchanged from last month’s estimate. In SH 2019, growth will remain broadly stable at 4.4%.

Read more on the Iranian economy


Available economic indicators suggest the economy continued to fire on all cylinders at the outset of the year. Domestic demand remains resilient as shown by strong import growth in January, while healthy global demand is propelling exports and activity in the manufacturing sector. That said, data for the first two months of the year is highly distorted by the Lunar New Year holidays. Because of China’s healthy growth momentum and rising confidence about the state of the economy, the yuan has strengthened sharply in recent weeks. With the economy sailing smoothly, the country will hold the annual National People's Congress in early March, in which the main policies and economic targets will be rubberstamped. In the wake of 2017’s strong growth, the government will likely leave the growth target unchanged from last year at 6.5%.

This year, economic growth will moderate, mostly due to slightly weaker domestic demand as authorities continue enforcing financial deleveraging via tighter financial regulations. That said, the deceleration will be only gradual and managed by the government. FocusEconomics panelists forecast that the economy will grow 6.5% in 2018, which is unchanged from last month’s forecast. In 2019, the economy is expected to grow 6.3%.

Read more on the Chinese economy

United Arab Emirates

The strong tailwinds that were in place in 2017 are keeping the non-oil economy sailing smoothly in the early months of 2018, despite a slowdown following the introduction of a 5% VAT in January. The non-oil PMI receded to a five-month low in February on lower output growth but remains in expansion territory, buttressed by strong domestic demand. Moreover, despite the constraints imposed by the OPEC agreement to cut oil production, the hydrocarbon sector is benefiting from higher oil prices compared to last year. Looking ahead, stronger oil revenues are poised to support government spending this year. Notably, a large increase in infrastructure spending is expected, especially in Dubai, which hosts the 2020 World Expo and is already benefitting from a boom in construction.

Strong public sector support should drive a sharp increase in growth in the non-oil economy this year, while household consumption remains constrained following the implementation of VAT. Public spending should furthermore be reinforced by higher oil prices amid healthy global growth. Finally, tourism growth will likely remain robust, particularly in Dubai as the city prepares for the 2020 World Expo. However, downside risks related to regional instability remain, notably the ongoing feud with Qatar, as well as risks of volatility in oil prices. FocusEconomics panelists expect GDP to increase 2.8% in 2018, which is unchanged from last month’s forecast, and 3.3% in 2019.

Read more on the Emirati economy


Growth accelerated notably in the last quarter of 2017, although it fell short of market expectations. It was led by strengthening household spending on the back of falling unemployment and low inflation and a turnaround in fixed investment. According to available indicators, the positive economic momentum seems to have carried over into the first quarter of this year. In January, the current account deficit narrowed year-on-year. Moreover, in February business confidence moved into optimistic territory for the first time since mid-2013, and the manufacturing PMI rose on the back of solid domestic demand and job creation. However, in the same month, consumer confidence dipped, remaining deeply entrenched in pessimistic territory. The government’s decision to postpone the reform of the country’s generous pension system prompted Fitch Ratings to downgrade Brazil’s credit rating from BB to BB- in late February. Fitch, which also revised the outlook from stable to negative, cited the bulky government debt and troubled political environment as additional reasons for the downgrade.

Manageable inflation and improving labor market conditions should underpin consumer spending this year. A rebound in fixed investment is expected on the back of more favorable financing conditions due to monetary easing and rising business confidence. However, a market-unfriendly outcome from October’s elections poses the main downward risk to the outlook. FocusEconomics panelists see the economy growing 2.5% in 2018, unchanged from last month’s forecast, and 2.7% in 2019.

Read more on the Brazilian economy


Kuwait’s economic prospects are improving, with the economy expected to return to growth this year on the heels of what appears to have been a consumer spending-driven turnaround in the second half of last year. Consumer sentiment was again upbeat in January, likely benefiting from a boost in real estate prices and higher private-sector bank deposits. On the other hand, low oil prices and full compliance with OPEC production cuts have battered the public coffers. This year’s budget, approved in late January, will require significant borrowing and drawing down reserves. Missing from the budget was the introduction of the VAT agreed to by the country’s GCC peers, which lawmakers will likely delay until next year.

Higher oil prices and infrastructure spending will underpin fixed investment this year, while lower unemployment and the delay in the introduction of VAT will support consumer spending. Over the medium term, further delays in long-overdue structural reforms could weigh on growth. FocusEconomics panelists see growth at 2.3% in 2018, down 0.1 percentage points from last month’s forecast, and 2.9% in 2019.

Read more on the Kuwaiti economy


Venezuela remains beset by profound economic and political crises. According to figures released by congress, which the opposition controls, the economy shrank a staggering 13.2% in 2017, marking the fourth year of a crippling recession. Citing ongoing fiscal struggles, Moody’s downgraded the government’s credit rating to C from Caa3 on 9 March. As the country descends deeper into crisis, it is gearing up for presidential elections now scheduled for 20 May, after they were initially moved forward to 22 April from December, when they are usually held. Many political parties opted to not participate in what they see as fraudulent elections that lack legitimacy. Moreover, the U.S. and the EU are contemplating additional sanctions against the country, while a group of Latin American nations, known as the “Lima group”, rejected the election and its outcome. In the first week of March, former governor Henri Falcón broke with the opposition coalition to launch his presidential candidacy. Although polls suggest that he could be a serious challenger, it is unlikely that he will beat Maduro.

Venezuela is expected to remain in a deep recession in the short to medium term on the back of hyperinflation, shortages of goods and large fiscal imbalances. While a rebound in the oil sector could alleviate some of the battered country’s issues, oil prices are expected to remain below the USD 100 mark, making it unlikely oil profits will significantly improve the country’s fortunes. FocusEconomics panelists see the economy contracting 7.7% in 2018, which is down 1.0 percentage point from last month’s forecast. In 2019, GDP is seen falling 1.5%.

Read more on the Venezuela economy


The economy took a hit in the fourth quarter due to lower output in the offshore oil and gas sector. In quarter-on-quarter terms, economic output swung to a seasonally-adjusted contraction in the fourth quarter, down from an expansion in the previous quarter. The economy’s underlying strength, however, was evident from results excluding the offshore oil and gas sector, which showed that growth was healthy in Q4 and supported by positive consumption and investment dynamics. Overall, both the total economy and the mainland economy, which excludes petroleum activities and related ocean transport, grew faster in 2017 than in 2016—growth which translated into lower unemployment in 2017. Meanwhile, the economy has started this year on a strong footing: The consumer confidence indicator for Q1 was near a five-year high, and goods exports grew faster year-on-year than goods imports in January.

Despite the oil and gas sector’s poor performance in Q4, it is expected to expand this year due to higher hydrocarbon prices and investment. The mainland economy, however, could be weighed on by lower housing prices and a weakening in construction activity. FocusEconomics Consensus Forecast panelists expect total GDP to expand 2.1% in 2018, which is unchanged from last month’s forecast, and 2.1% again in 2019. Mainland GDP is expected to grow 2.2% in 2018, which is unchanged from last month, and 2.1% in 2019.

Read more on the Norwegian economy

What's to come for the top oil producers

Knock-on effects of low oil prices had significantly affected the economies of most of the countries above. That said, low oil prices are only part of the story; many of the economies above have suffered from underlying weaknesses that the low-oil price environment has only exacerbated. Looking into the future, despite the arguably underwhelming effect that the OPEC deal has had on oil prices, they have risen significantly from the lows of early 2015 and are expected to gradually recover through this year and into next. However, uncertainty still remains and uncertainty in economics is seldom a good thing.

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Date: March 15, 2018

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