DUBAI (Reuters) – The International Monetary Fund (IMF) expects Saudi Arabia’s economy to grow 0.2% this year, down from an earlier estimate of 1.9%, due largely to oil output cuts.
The impact to growth of last month’s attack on Saudi oil facilities – which initially halved production of the world’s biggest crude exporter – was difficult to assess but it “adds uncertainty to the near-term outlook,” the IMF said in its World Economic Outlook report published on Tuesday.
The Saudi economy, the largest in the Arab world, has suffered in recent years because of low oil prices and austerity measures aimed at reducing a huge budget deficit.
In 2017, it shrank for the first time since the global financial crisis almost a decade earlier, but last year, it grew 2.2%, boosted by a strong oil sector.
The economy remains dominated by hydrocarbon revenues despite Crown Prince Mohammed bin Salman’s assertion that he aims to diversify it.
Riyadh has restrained crude production by more than called for by an OPEC-led supply deal aimed at supporting oil markets, but slowing oil demand and a weakening global economy have kept prices under pressure.
This is weighing on the kingdom’s economic growth, with some economists forecasting a contraction this year.
The IMF said the Saudi economy is expected to pick up again next year, forecasting 2.2% growth “as oil GDP stabilizes and solid momentum in the non-oil sector continues.”
Growth in the non-oil sector is expected to be 2.9% this year, the IMF has said previously.
The Saudi finance minister, Mohammed al-Jadaan told Reuters in an interview last month that economic growth was expected to be “significantly” below previous Saudi expectations, but didn’t provide a figure.
(Reporting by Davide Barbuscia; Editing by Bernadette Baum)