The International Monetary Fund (IMF) has lowered its growth outlook for Saudi Arabia’s economy for the second time in three months as a result of the extension of oil productions cuts by Opec-plus.
The Washington lender cut the GDP forecast for the Arab world’s largest economy and lead Opec producer by 0.2% for this year, estimating output at 1.5%, it said on Tuesday in an update to its World Economic Outlook.
The fund also lowered its projection for the kingdom’s economy in 2025 by 0.1%, with growth expected at 4.6%. Growth in the United Arab Emirates, the second-largest Arab economy and third-biggest producer of Opec, is forecast at 4% in 2024 and 3.1% in 2025.
The IMF said it expects oil prices to rise 0.9% in 2024 to about $81 per barrel as production cuts by Opec-plus, sustained global oil demand growth and geopolitical tensions in the Middle East offset strong non-Opec-plus supply growth. It lowered its estimate for oil prices in 2025 to $72.84/bbl compared with its previous estimate three months ago of $76.38/bbl.
In June, the Opec-plus alliance, led by Saudi Arabia and Russia, extended 3.66 million barrels per day of production cuts to the end of 2025.
In September, eight members of Opec-plus delayed by two months the start of a plan to begin unwinding another 2.2 million b/d tranche of voluntary production cuts amid concerns about oil price volatility.
Hydrocarbon revenues have helped shore up foreign currency reserves at the Saudi central bank, which increased an annual 10% to about $470 billion at the end of August.
While the kingdom’s economy contracted 0.3% in the second quarter of this year, slightly above the preliminary estimate of 0.4%, government spending on so-called gigaprojects and its non-oil private sector economy continue to register robust growth.
Saudi Arabia’s non-oil purchasing manager’s index rose to 56.3 in September, the highest since May, from 54.8 the previous month.
| Economic Growth Estimates | ||
| Real GDP Growth % | ||
| Country | 2024 | 2025 |
| US | 2.8% | 2.2% |
| Germany | 0.0 | 0.8 |
| France | 1.1 | 1.1 |
| Italy | 0.7 | 0.8 |
| Spain | 2.9 | 2.1 |
| Japan | 0.3 | 1.1 |
| UK | 1.1 | 1.5 |
| Canada | 1.3 | 2.4 |
| China | 4.8 | 4.5 |
| India | 7.0 | 6.5 |
| Saudi Arabia | 1.5 | 4.6 |
| EU | 1.1 | 1.6 |
| ASEAN-5 | 4.5 | 4.5 |
| Middle East and North Africa | 2.1 | 4.0 |
| Emerging Market and Middle-Income Economies | 4.2 | 4.2 |
| Low-Income Developing Countries | 4.0% | 4.7% |
| Source: IMF | ||
Outlook
In September, S&P Global revised its outlook on the kingdom to positive and affirmed its investment grade “A/A-1” credit rating.
“Large hydrocarbon reserves and low production costs, alongside large cash buffers at national oil company Saudi Aramco, provide Saudi Arabia some resilience to a global energy transition to low-carbon alternatives, especially in a future scenario where fossil fuel demand will largely be met by a smaller number of the most efficient producers,” S&P said.
Despite Saudi Arabia’s downward revision, the kingdom’s economic expansion is set to outpace several G20 nations. Those include Germany, whose economy is expected to remain flat this year, while France and the UK are each expected to see growth of 1.1%, Italy a 0.7% uptick and Japan a 0.3% increase, according to the IMF.
China and India, two of Saudi Arabia and the UAE’s biggest crude customers, are seen expanding by 4.8% and 7%, respectively, this year. Despite the shadow of the Ukraine war, Russia’s economy will register growth of 3.6%.
Iran, which has been under US sanctions and is bracing for an imminent attack from Israel, is expected to register 3.7% growth in 2024. Israel, which has been at war in Gaza for more than a year and is now on the attack against Hezbollah in Lebanon, will see economic growth slow to 0.7% in 2024 from 2% in 2023.
The global economy is expected to grow 3.2% in 2024 and 2025, but intensifying conflicts have led to downward growth revisions of some low-income and developing economies. Trade growth is set to recover to about 3.1% after stagnating in 2023.