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The International Monetary Fund downgraded its growth forecasts for oil exporting countries in the Middle East and North Africa, including Saudi Arabia and Iraq, citing escalating global trade tensions and lower energy prices.
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The IMF cut the 2025 outlook for oil exporters in the region to 2.3%, 1.7 percentage points lower than the fund’s forecast from October. The projections were announced by the Washington based lender on Thursday in its latest regional economic outlook.
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The IMF expects oil prices to decline to an average of $66.9 per barrel this year, nearly $6 below the October projection. It cited strong supply growth from non-OPEC+ countries and subdued demand because of a slowing global economy.
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Prices for Brent crude have slumped around 15% this year to roughly $63 a barrel. That’s been down to the US-led trade wars and OPEC+ announcing a faster-than-expected increase in oil output.
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Iraq got one of the largest downgrades. The IMF now expects its gross domestic product to contract 1.5% this year, rather than rise 4.1%, as was the presumption in October. Saudi Arabia’s outlook was lowered to 3% from 4.6%.
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While non-oil growth is expected to be bolstered by infrastructure projects and other diversification efforts in the Gulf, the IMF says some government spending may be lowered in line with crude prices.
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There’s been a “recalibration of investment spending plans resulting from softer oil prices, further amplified by the decline in oil prices from the recent escalation of trade tensions,” said the IMF.
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All the same, the direct impact of changes in tariffs is “generally limited” on the GCC because of the tariff exemption on energy exports and the limited non-oil exports to the US, the lender said.
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The whole MENA region is expected to grow 2.6% this year, 1.4 percentage points lower than October’s estimate.
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