Bearish crude amid collapsing commodities, have taken over entire market since the beginning of year 2016. Cheaper crude oil should only boost the economic growth of emerging markets. But it is a catastrophe for the oil exporters. Is the global market prone to next biggest financial threat; a total of collapse in stock market, beyond the sell-off marked at this year’s starting? There might be a possibility, ofcourse. Latest scenario of falling crude and commodity cost could point towards national bankruptcies.
This time might be commodity exporters get caught up in the maelstrom rather than peripheral Euro-zone countries. As somewhat similar to the crisis taking place within that pacific, the losses would soon be eroding away the banking foundations – long before there comes a series of emergency bailouts.
Keeping in view Azerbaijan’s bailout and Venezuela going out of bust, The International Monetary Fund (IMF) is in critical discourses. Likewise is the situation for Ecuador that does not seem in a better position.
One of the largest crude exporters, Azerbaijan shows profound crashes among the former Soviet states leading it to open discourses with IMF regarding emergency assistance – of which also includes a loan package of US$ 4 billion (worth mentioning that its oil reserves had been built during a period when crude had been TRADING at US$ 100/barrel or more). Rich in natural resources yet threatened, Venezuela is in a more perplexed situation. An insight into Nigerian pacific reveals its plea for US$ 3.5 billion in loans from the World Bank and African Development Bank.
Finally, what to look into important countries — Saudi Arabia and Russia — the two of oil-driven economies? There’s a probability for them to follow the same momentum as none of them seems solvent for long-term commodity costs at bearish levels. Despite of lowest production cost in the world, Saudis deal with larger expenses and seemingly does not have any other source of income. Last year, the country ran a budget debit of US$ 100 billion. Morever with the bearish crude cost, and despite cuts, this year it’s unlikely to get into a better form. That amounts to 15% of gross domestic product, which makes Greece look positively economical.
On a similar note, Russian budget does not depict even cent percent similar image. Finance Ministry projections put it at US$ 20 billion for this year, or around 3% of GDP – based on oil at US$ 40/barrel – an old folk now.
Which countries go bust, and how long it’ll take them to get there, remains a current mystery. However, the 2008-collapse and the 2011-Euro crisis are more of an evidence for us to realize that a sovereign-debt crisis quickly morphs into a banking turmoil. Very likely, the same global scenario can take place: There’re loans to national oil companies, and state-backed construction projects, which could all turn to rubble if not taken with caution.
