The US Shale Oil Revolution Requires Major Reforms in the Macroeconomic Policy Frameworks and Institutions in the MENA Region

The shale oil revolution in the United States, contributing to lower global oil prices, has important macroeconomic implications for the Middle East and North Africa (MENA) region. In response to a U.S. supply-driven fall in oil prices, energy-exporters in the region face a decline in economic activity, mainly because lower oil prices weaken domestic demand as well as external and fiscal balances in these countries. Negative growth effects (albeit smaller) are also observed for energy-importers which have strong economic ties with oil exporters, through spillover effects. For the MENA countries the current low oil-price environment provides an opportunity for further subsidy and structural reforms.