IMF Economic Counsellor Maurice Obstfeld (C), deputy director Gian Maria Milesi-Ferretti (L) and communications officer Wafa Amr (R) answering questions during the World Economic Outlook press conference during the 2018 IMF/World Bank annual meetings in Nusa Dua on the Indonesian resort island of Bali. Image Credit: AFP

Dubai: The International Monetary Fund (IMF) has raised the economic forecasts of all the GCC countries for 2018 and 2019 in its latest World Economic Outlook report.

The IMF attributed the upward revision to a pick-up in non-oil economic activity and a projected increase in crude oil production in line with the revised Organisation of Petroleum Exporting Countries Plus (Opec+) agreement.

According to the latest estimates, the UAE’s GDP is expected to growth 2.91 per cent in 2018, compared to the July estimates of 1.96 per cent. In 2019, the UAE’s GDP is forecast to grow by 3.66 per cent, compared to the earlier estimate of 3.04 per cent.

The IMF concluded its Article IV Consultation on the UAE and said the economy continues to adjust to a prolonged decline in oil prices since 2014. With oil production and government spending set to rise, overall growth is projected to strengthen this year and the next.

The IMF has observed that the oil exporters from the Middle East region, with the exception of Iran, are expected to have a positive impact on their economic growth in 2018 and 2019. In the GCC, Oman’s 2019 estimated GDP growth of 5.05 per cent is the highest in the region.

Saudi Arabia is estimated to grow at 2.3 per cent in 2018 and 2.43 per cent in 2019. While Kuwait’s economic growth is projected higher by more than 1 per cent at 2.33 per cent this year compared to April forecast of 1.28 per cent, the oil exporting country’s GDP is estimated to grow to 4.06 per cent in 2019.

Bahrain, which received $10 billion (Dh36.73 billion) in financial aid last week from Saudi Arabia, Kuwait and the UAE, has embarked on a fiscal stabilisation programme. The IMF has projected a 3.5 per cent GDP growth this year and 2.59 per cent in 2019.

A package of reforms announced by Bahrain’s government last Thursday is targeting 800 million Bahraini dinars ($2.12 billion) in annual savings, in addition to eliminating its budget deficit by 2022. Manama had projected a $3.5 billion budget deficit in 2018.

In the Middle East, North Africa, Afghanistan, and Pakistan (MENAP) region, which includes both oil-importing and exporting economies, growth is projected to increase from 2.2 per cent in 2017 to 2.4 per cent in 2018 and to 2.7 per cent in 2019, stabilising at about 3 per cent in the medium term — a sizeable downward revision compared with the April 2018 WEO forecast.

The downward revisions reflect to an important extent the worsening of growth prospects for Iran, following the re-imposition of US sanctions. The economy is now forecast to contract in 2018 (minus 1.5 per cent) and in 2019.

 

IMF revises 2018 global growth downwards

The World Economic Outlook (WEO) report of the International Monetary Fund (IMF) has revised the global economic outlook for 2018 and 2019 downwards compared to its forecast in April this year.

According to the latest WEO, downside risks to global growth have risen in the past six months and the potential for upside surprises has receded. Global growth is projected at 3.7 per cent for 2018–19 — 0.2 percentage points lower for both years than forecast in April.

“The downward revision reflects surprises that suppressed activity in early 2018 in some major advanced economies, the negative effects of the trade measures implemented or approved between April and mid-September, as well as a weaker outlook for some key emerging market and developing economies arising from country-specific factors, tighter financial conditions, geopolitical tensions, and higher oil import bills,” the WEO report said.

Going forward, in the next couple of years, the IMF expects monetary policy settings to normalise and growth in most advanced economies are projected to decline to potential rates well below the averages reached before the global financial crisis of a decade ago. Medium-term prospects remain generally strong in emerging Asia but subpar in some emerging market and developing economies.

The IMF has warned that emerging economies are likely to face further pressure from policy shifts in advanced economies.

“While financial market conditions remain accommodative in advanced economies, they could tighten rapidly if trade tensions and policy uncertainty intensify, or unexpectedly high inflation in the United States triggers a stronger-than-anticipated monetary policy response,” the WEO said.