Blog Post

Rapid and well-coordinated measures have limited the spread of COVID-19, but lockdown restrictions weighed heavily on economic activity in 2020. The slump in oil prices and exports has significantly widened fiscal and external deficits and resulted in higher public debt and financing risks. The outlook assumes containing the pan-demic, avoidance of another oil price plunge and successful implementation of fiscal consolidation plans. Materialization of downside scenarios would heighten external financing pressures.

Recent Developments
Overall growth is estimated to have contracted by 6 percent in 2020. This is mainly driven by more than 9 percent contraction in non-oil GDP as the subsequent lockdown measures weighed heavily on domestic demand where tourism and services sectors have suffered the most. A significant increase in the production of condensates that is not subject to the OPEC+ cut deal has helped the oil sector to adapt to the crisis, at least in volume terms, with oil GDP has seen only a 2 percent contraction. Inflation turned negative at -1.0 percent (y/y) in 2020 reflecting weak domestic demand.

Outlook
Overall growth is projected to post a tepid recovery of 2.5 percent in 2021 supported by the vaccine roll-out and the ease in lock-down restrictions. A backloaded rebound will see growth peak at 6.5 percent in 2022 lifted by rising oil prices, and further development of the hydrocarbon sector, before declining to 4 percent in 2023 in view of fiscal austerity measures. Inflation is projected to pick up to 3 percent in 2021, reflecting the recovery of domestic demand and the April 2021 introduction of VAT, but to decline in the years to come as VAT-driven impact on inflation dissipates.