The International Monetary Fund (IMF) has downgraded its economic growth forecast for the oil exporters in the Middle East to 2.3% from 4% expected in October, due to the slide in oil prices.
“Across the region, rising trade tensions and policy uncertainty are adding to the impact of conflicts and extended oil production cuts to weaken growth prospects,” the IMF said on Thursday in its Regional Economic Outlook for the Middle East and Central Asia.
The IMF expects oil prices to decline in 2025 to $66.90 per barrel, nearly $6 below the October projection, “as the gradual phase-out of OPEC+ oil production cuts and strong supply growth from non-OPEC+ countries are expected to outpace subdued global oil demand growth amid expectations of weaker global economic prospects.”
The oil market will be moderately oversupplied this year, the IMF said, noting that bearish trends are expected to exert downward pressure on oil prices this year. Oil demand globally is now set to be somewhat weaker than anticipated in October 2024, “mainly because of increased policy uncertainty and escalating trade tensions amid weak fundamentals,” the fund said.
Across the Middle East, non-oil growth is also expected to be lower compared with the October projections because major oil exporters are likely to tweak investment spending plans due to the softer oil prices.
“Elevated uncertainty about oil prices makes it even more important for MENA oil exporters to focus on preserving fiscal buffers while ensuring an equitable redistribution of their natural resource wealth across current and future generations,” the IMF said, commenting on the challenges for the Middle East’s oil exporters.
The IMF also recommended that the petrostates develop and diversify non-oil revenue sources and eliminate energy subsidies where applicable.
Last week, the IMF downgraded Saudi Arabia’s GDP growth forecast to 3.0% this year, lower than a previous forecast of 3.3% economic growth, following the 13% decline in oil prices over the past month.
By Charles Kennedy for Oilprice.com
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