IMF dims 2023 Middle East outlook as Saudi Arabia's growth slows

The Middle East and North Africa’s growth projections for 2023 slumped compared to last year, according to the International Monetary Fund’s latest World Economic Outlook (WEO) report.

In 2022, the IMF estimated that the region’s gross domestic product grew by 5.4%. This year, it said that it would grow by only 2.6%, a downward adjustment of 0.5 percentage points from the fund's April economic forecast. The IMF's July 25 WEO update also projected the region's economy to grow by 3.1%, a downward revision of 0.3 percentage points on April's estimate. 

Saudi Arabia saw a huge fall in growth projections for its economy, from 8.7% last year to 1.9% in 2023. The IMF said the country showed a “steeper-than-expected growth slowdown," resulting in a negative revision of 1.2 percentage points for 2023. The IMF forecasts that the kingdom's economy will grow by 2.8% in 2024, a negative adjustment of 0.3 percentage points compared with April's forecast. 

“The downgrade for Saudi Arabia for 2023 reflects production cuts announced in April and June in line with an agreement through [the Organization of the Petroleum Exporting Countries plus Russia and other non-OPEC oil exporters], whereas private investment, including from "giga-project” implementation, continues to support strong non-oil GDP growth,” the IMF said in the report. 

Saudi Arabia announced on July 3 that it would extend its voluntary rate cut of 1 million barrels per day to include August in an attempt to stabilize oil markets. 

Economic projections for other MENA region countries were not included in the latest WEO update, but speaking at a press conference on Tuesday about the report, the deputy director of the IMF’s research department, Petya Koeva Brooks, said the fund maintained its April projections for 3.7% growth of Egypt’s GDP in 2023. However, Brooks added that the fund had raised Egypt’s inflation projections this year from 21.6% to 24.4%.

In the report, the Washington-based fund raised its global economic growth estimates slightly higher to 3% real GDP growth, up 0.2 percentage points from its April forecast. Outlook for 2024 remained unchanged at 3%.

The organization warned that there were risks on the horizon including high inflation, high interest rates and turbulence in the global banking market leading to tighter access to credit. It also said that China’s recovery from the coronavirus pandemic could further underperform, dampening the global economic outlook.

But it said that the global economy was in a stronger place following the World Trade Organization’s decision to end the global health emergency surrounding COVID-19 and with shipping costs and delivery times back to pre-pandemic levels. 

Al-Monitor has contacted the IMF for more details.