How the Collapse of Oil Hurts Poor Countries

Bloomberg Businessweek reports:

Natural resource rich countries are indisputably in for a painful year: Oil and gas account for two-thirds of Russia’s exports, for example, and oil income provides about 45 percent of the government’s revenues. At any oil price of below about $100—twice current prices—the government will run a deficit. The International Monetary Fund suggests that the “fiscal breakeven” price for Saudi Arabia and Iraq is similar to Russia’s; oil-producers Nigeria, Algeria, Iran, and Libya face even more acute budget crises and probable recessions.

The price collapse is almost mechanically guaranteed to reduce the share of major producers’ gross domestic product and exports that comes from oil. This is what believers in the “resource curse” think is essential for long-term growth in the developing world.

Just a reminder.