Why oil-producing economies need to diversify

The oil price recovery above US$70/bbl is a relief for oil-producing economies of the Middle East and Africa. After cutting expenditures hard in 2015 and 2016, the price rally will improve fiscal balances greatly, some returning to surplus this year.  While immediate fiscal pressure is easing on oil-producing economies, the long-term challenges haven't gone away. Oil industries alone cannot support economic growth and government finances over the longer term. If oil economies remain as dependent on oil production for government revenue as they are today, there could be trouble ahead. Economic diversification can generate new sources of revenue. In this Insight, we assess the prospects for diversification in Saudi Arabia, Iran, Iraq, Nigeria, the UAE, Kuwait and Angola.