IMF raises Saudi growth forecast on stronger oil

The International Monetary Fund (IMF) has revised upwards its forecast on Saudi Arabia’s economic growth in 2018 to 1.6 percent, an increase of 0.5 percentage points from its October projections, noting the support from stronger oil prices.

“While stronger oil prices are helping a recovery in domestic demand in oil exporters, including Saudi Arabia, the fiscal adjustment that is still needed is projected to weigh on growth prospects,” IMF said in an update to its World Economic Outlook released Monday.

The Fund also raised Saudi Arabia’s growth forecast for 2019 to 2.2 percent.

For the Middle East, North Africa, Afghanistan, and Pakistan region as a whole, the IMF said the growth is expected to remain low at around 3.5 percent.

Last year, the Fund maintained a “subdued” outlook on Middle East oil exporters on the back of OPEC-led output cuts, low oil prices and regional conflicts.

It had also said in October that Saudi Arabia will need oil prices at $70 a barrel (bbl) to break even in 2018.

Since October, oil prices have edged higher and are currently trading near three-year highs, after crossing the $70-mark earlier this month, as global markets continue to tighten driven by OPEC’s output agreement  that aims to ease supply glut and boost oil prices.

On Sunday, Saudi Arabia’s energy minister Khalid Al-Falih said the output deal has helped remove 220 million barrels of oil from an overhang in the market of around 340 million barrels.

Al-Falih serves as the joint-chairperson of the Joint Ministerial Monitoring Committee that is overseeing the output deal between OPEC and other major producers, including Russia.

Write to Nadeshda Zareen at nadeshda.zareen@argaamplus.com