The International Monetary Fund (IMF), which just lowered its 2019 global growth forecast for a fifth straight time, expects Saudi Arabia’s economy to grow 0.2 per cent this year, down from an earlier estimate of 1.9 per cent, owing to oil output cuts.
The IMF stated that “While non-oil growth is expected to strengthen in 2019 on higher government spending and confidence, oil GDP in Saudi Arabia is projected to decline against the backdrop of the extension of the Organisation of Petroleum Exporting Countries and their allies (OPEC+) agreement and a generally weak global oil market.”
Despite an acceleration in non-oil growth this year to the fastest since 2015, output curbs negotiated by OPEC are increasingly a drag on an economy where the energy sector accounts for about 50 per cent of GDP. Additionally, the attack on Saudi oil infrastructure last month also put the spotlight on risks ahead.
The Washington-based fund also projected a more modest pick-up next year, with a gain of 2.2 per cent while growth in the non-oil sector is expected to be 2.9 per cent this year.
The impact on growth of the recent attacks on Saudi Arabia’s oil facilities is difficult to gauge at this stage but adds uncertainty to the near-term outlook, said the IMF.
Additionally, the IMF’s October downward revision of the global growth forecast—by 0.3 per cent to three per cent and by 0.2 per cent to 3.4 per cent for 2019 and 2020, respectively, from its April 2019 forecast—illustrates a slowdown in global activity, driven in particular by emerging markets and the euro area.