Middle East Growth to Slow

Economic growth in Saudi Arabia and most other Arab oil exporters will slow this year following production cuts aimed at propping up energy prices, the International Monetary Fund said Tuesday.

In its latest World Economic Outlook report, the IMF cut its 2017 growth forecast for the region comprising the Middle East, North Africa, Afghanistan and Pakistan to 2.6%, down from the 3.1% projected in January, Reuters reported.

“The subdued pace of expansion reflects lower headline growth in the region’s oil exporters, driven by the November 2016 OPEC agreement to cut oil production,” the Washington-based IMF said.

It “masks the expected pickup in non-oil growth as the pace of fiscal adjustment to structurally lower oil revenues slows,” the IMF added, referring to measures to cut budget deficits.

Members of OPEC, mostly from the region, agreed last year to reduce output by 1.2 million barrels per day from January 1 for six months, to support crude prices that had shed half of their value since mid-2014.

“Growth in Saudi Arabia, the region’s largest economy, is expected to slow to 0.4% in 2017 because of lower oil production and ongoing fiscal consolidation, before picking up to 1.3% in 2018,” the IMF said.

It said that growth is likely to dip in most (Persian) Gulf Cooperation Council member states (Saudi Arabia, Kuwait, the UAE, Qatar, Bahrain, and Oman).

One bright spot is gas-rich Qatar which is expected to register 3.4% growth this year, compared with 2.7% in 2016. Kuwait’s economy, in contrast, is forecast to shrink by 0.2%.

In Algeria, the IMF sees economic growth of 1.4% this year, down from 4.2% last year.

Iraq’s economy is expected to contract by 3.1% in 2017 after surging by 10.1% last year on the back of expanding oil exports after sharp contractions in the previous two years.

The overall figure for the region overshadows a faster pace in many of its oil-importing countries.

Morocco’s economic growth is forecast to jump from 1.5% last year to 4.4% this year, while Tunisia’s economy is seen expanding by 2.5% compared with just 1% the year before.

On the other hand Egypt, whose currency plummeted in value after authorities floated it in November, will see slower growth of 3.5% this year, compared with 4.3% last year.

“In Egypt, comprehensive reforms are expected to deliver sizable growth dividends, lifting growth ... to 4.5% in 2018,” it said.