Oil and Gas in Arab GDP

Oil has long been the lifeblood of some of the Arab oil-producing countries, serving as the cornerstone of prosperity and growth. It has underpinned the development of infrastructure, healthcare and education, propelling these nations into modernity. However, over-reliance on oil can leave these economies vulnerable to market volatility and economic shocks. This article examines the critical role of oil rents, natural gas rents, and the share of national income derived from oil and gas production in shaping the economic trajectories of a group of Arab countries over the decade from 2012 to 2021.

Over the past decade, the economic landscape of Arab countries has been heavily influenced by the contribution of oil revenues to GDP. In Libya, oil rents accounted for a significant share of national income in 2012 and 2021, although with the share experiencing fluctuations between these years due to the country's political instability. In contrast, the economies of Algeria and Bahrain have benefited from oil rents to a more modest extent. Interestingly, the ratio of oil rents to GDP in these countries fell significantly by 2020, indicating the widespread economic impact of the COVID-19 pandemic.

Arab countries | Oil rents (% of GDP)

Iraq's oil GDP growth has been among the high rates, maintaining high levels, as the country's economy relies heavily on oil, accounting for more than 40% of GDP. However, there was a significant drop in 2020, falling to 27 per cent, before returning to around 43 per cent in 2021.

Iraq | Oil rents (% of GDP)

Egypt's oil-adjusted GDP growth has been modest compared to other countries in the region, not exceeding 9 % over the past decade. Among the Arab countries mentioned in this article, Egypt is the least dependent on oil for its national income. This reflects the strength of Egypt's diverse economic sectors. But it also points to the country's limited oil resources.

Egypt, Arab Rep. | Oil rents (% of GDP)

GDP growth from natural gas

All the countries mentioned in this article are both gas and oil producers and the level of production varies according to their respective gas and oil reserves. In general, oil contributes more to GDP than gas due to the larger oil reserves. However, Algeria stands out as a country with a higher share of gas in GDP compared to these countries, while Iraq has the lowest share of gas and a large difference between oil and gas, with a 42% difference between gas and oil in 2021.

Arab countries | Natural gas rents (% of GDP)

Diversification is a bulwark of resilience, acting as a safeguard against market volatility. In a scenario where economic disruptions in one sector can be offset by the stability of another, countries that exploit both oil and gas resources are less vulnerable to oil price fluctuations than those that rely solely on oil.

The contribution of natural gas rents to Algeria's GDP in 2021 is 8%, while the contribution of oil rents was 14%. This represents a difference of 6% between the contributions of gas and oil to GDP, while in 2012 the difference was 19%.

Algeria | Oil rents-Gas rents (% of GDP)