IMF lowers Saudi growth forecast on oil output cuts

The International Monetary Fund (IMF) has reduced its 2018 growth forecast for Saudi Arabia on expectations that a decline in oil production and ongoing fiscal consolidation measures will have weigh on the kingdom’s economy.

Saudi Arabia’s growth is expected to slow to 1.3 percent in 2018, compared to the IMF's January projection of 2.3 percent, the Fund said in its World Economic Outlook on Tuesday.

The growth forecast for 2017 was unchanged at 0.4 percent.

The near-term outlook for the Middle East, North Africa, Afghanistan, and Pakistan region was also lowered to 2.6 percent in 2017.

“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, which masks the expected pickup in non-oil growth as the pace of fiscal adjustment to structurally lower oil revenues slows,” the IMF said.

Saudi Arabia agreed with fellow OPEC members to cut oil production by a combined 1.2 million barrels per day (mbd) last November, with the output ceiling for the cartel fixed at 32.5 mbd. Under the agreement, the kingdom’s allocation was 10.06 mbd.

The GCC nation has so far cut more than its required share, with output at 10.01 mbd in February this year, according to figures from the Joint Organizations Data Initiative (JODI). Exports, meanwhile, hit a 21-month low at 6.96 mbd.

Elsewhere in the region, growth in the United Arab Emirates is expected fall to 1.5 percent this year from 2.7 percent in 2016 and rise 4.4 percent next year, the IMF said.

Meanwhile, Qatar’s economy is projected to expand by 3.4 percent this year, and slow to 2.8 percent in 2018, the Fund said.

Kuwait’s economy is expected to shrink by 0.2 percent in 2017, and rebound to 3.5 percent next year.