North African Importers to Reap Benefits of Oil Price Fall

Lower oil prices are poised to give a big boost to North Africa’s energy importers, steadying their government budgets and reducing fuel subsidy bills, according to a recent Capital Economics note.

The benefits will be felt most strongly in Morocco, the note says, where net fuel imports are the highest in the region: more than 10% of GDP. Should oil prices remain at current levels below $50 a barrel, Morocco’s energy deficit would be reduced by about $5.5 billion — or 5% of GDP — Capital Economics says.

Egypt and Tunisia, North Africa’s two other big energy importers, will also see benefits from the oil-price slide, but the savings won’t be as dramatic. They will mostly accrue to governments because energy prices in those countries are heavily subsidized.

In Egypt, a sustained drop in oil prices stands to lower the government energy subsidy bill by 3% of GDP, Capital Economics said. But because so much energy is already subsidized, the decline in prices isn’t likely to have a huge effect on inflation.

The broader economic effects on these countries are more difficult to gauge. They depend largely on how governments and consumers spend the money that otherwise would have gone toward energy, the […]

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