DUBAI: The International Monetary Fund slashed growth forecasts Tuesday for Middle East and North Africa (MENA) oil exporters over a steep drop in crude prices, raging conflicts and continued uncertainty.
But in its semi-annual World Economic Outlook, the IMF said the 50-percent plunge in oil prices since June has provided “much-needed breathing room for oil importers” in the region, and it revised their growth projections upward.
MENA oil exporters, including the Gulf states, Yemen, Iran, Iraq, Libya and Algeria, are projected to see economic growth of 2.4 percent this year compared with the 3.9 percent forecast in October.
However, their growth is projected to jump to 3.5 percent in 2016.
“The steep decline in oil prices has weakened the external and fiscal balances of the region’s oil exporters,” the IMF said, referring to foreign trade and budgets.
Together, they pump around 25.5 million barrels per day, or more than 27 percent of global supplies.
The IMF slashed the 2015 growth forecast for OPEC kingpin Saudi Arabia to 3.0 percent from 4.5 percent in October.
“With the decline in oil prices, the fiscal balance in Saudi Arabia will move into substantial deficit in 2015 and 2016,” the IMF said.
Growth forecasts for the remaining five members of the Gulf Cooperation Council — Bahrain, Kuwait, Oman, Qatar and the United Arab Emirates — have also been lowered.
The IMF report did not account for the effect on the region’s economies of the conflict in Yemen, where a Saudi-led coalition launched last month an air campaign against Shiite rebels in support of fugitive President Abedrabbo Mansour Hadi.
Iran’s economy is now projected to grow by 0.6 percent this year and 1.3 percent in 2016, sharply lower than October forecasts of 2.2 percent and 2.3 percent, respectively.
The downward revisions reflect the impact of lower oil prices and uncertainty about Tehran’s nuclear deal with Western powers.
The 2015 growth forecast for Iraq, OPEC’s second-largest producer whose economy contracted by 2.4 percent last year, was lowered to 1.3 percent from the 1.5 percent foreseen in October.
Algeria’s economy is now forecast to grow 2.6 percent in 2015, down from 4.0 percent projected in October. It grew by 4.1 percent last year.
Oil production and prices, as well as continued conflicts, constitute important risks to the outlook for the overall MENA region.
“Heightened uncertainty in the oil market persists, with oil price volatility at historically high levels and risks for oil production skewed to the downside,” the IMF said.
Earlier this year, the Fund expected the plunge in oil prices to cost GCC states around $300 billion, almost half of their oil income.
Almost all GCC states have projected a budget deficit this year after enjoying surpluses for several years.
“Faced with large losses from lower oil prices, most oil exporters need to recalibrate their medium-term fiscal consolidation plans,” the IMF said.
GCC states have foreign reserves estimated at around $2.5 trillion.
For MENA oil importers, the picture is the opposite.
The IMF revised upward 2015 growth projections for them from 3.7 percent to 4.0 percent. They grew by 3.0 percent last year.
“Lower oil prices create conditions for continuing subsidy reforms to build fiscal space for growth-enhancing spending,” IMF said.
Egypt’s economy, which grew by 2.2 percent last year, is now forecast to improve by 4.0 percent in 2015. That is up from October’s projection of 3.5 percent.