The International Monetary Fund raised global economic growth expectations (Al Jazeera)

The International Monetary Fund reduced its forecast for Saudi economic growth to 2.7% in 2024 from 4% expected last October in light of the decline in oil production, but it expected the growth of non-oil activity to remain strong this year.

According to updated data from the Fund’s annual report on the global economy, which was published today, Tuesday, the Saudi economy contracted in 2023 by 1.1% from the 0.8% growth that was expected last October.

The Saudi government estimates that the gross domestic product will grow by 0.03% in 2023, avoiding contraction by a small margin, but no official data has been issued yet.

On the other hand, the International Monetary Fund raised its 2025 growth forecast to 5.5% from 4.2% expected last October.

The Fund said that the adjustments are mainly due to Saudi Arabia, and reflect a temporary decline in oil production in 2024, including unilateral cuts and reductions within the framework of the OPEC Plus alliance agreement, while the growth of non-oil activity is expected to remain strong.

It is noteworthy that Saudi Arabia, which has the largest economy in the Arab world, seeks to diversify its economy through Vision 2030.

The Saudi government expects a financial deficit in the coming years as spending increases to achieve the goals of Vision 2030, and aims to maintain non-oil GDP growth above 5%.

The Fund also revised down its overall growth expectations in the Middle East and Central Asia region to 2.9% from a previous estimate of 3.4% last October.

Egypt

The IMF lowered its forecast for Egypt's economic growth to 3% this year from 3.6% expected last October.

The international organization expected the Egyptian economy to grow by 4.7% in 2025, down from 5% expected in the latest World Economic Outlook reports issued last October.

The International Monetary Fund is scheduled to issue more detailed forecasts for the Middle East tomorrow.

International Economy

The Fund raised its global growth forecast for 2024 to 3.1% from 2.9% expected in October 2023, noting the resilience of major advanced and emerging economies around the world, and after a notable reassessment of the United States, China, India, Russia and Mexico.

"There was at the same time lower inflation and greater growth," IMF chief economist Pierre-Olivier Gorinchas told reporters before the fund's report was published.

He added, "This did not happen only in the United States. The economies of many countries showed great resilience last year, and this will continue in 2024." He mentioned China, Russia, Brazil, and India as examples.

However, despite the raised growth forecasts, global growth is expected to remain below its recent historical average of 3.8% this year and next due to the continuing effects of raising interest rates, the cancellation of government support related to the Covid-19 pandemic, and the continuing decline in productivity levels.

Among the G7 advanced economies, growth in European countries looks set to remain weak, reflecting ongoing challenges, while Japan and Canada's performance is expected to improve slightly.

The International Monetary Fund's inflation forecast remained unchanged at 5.8% for 2024, but this hides a large disparity between rich and poor countries.

The new data expected the inflation rate in advanced economies to reach 2.6% in 2024, a decrease of 0.4% from last October, at a time when the annual inflation rate in emerging and developing economies is expected to reach 8.1%.

The increase can be attributed in large part to ongoing problems in Argentina, where consumer price increases exceeded 200% last year amid a deep economic crisis.

  • The economies of both the United States and China grew at a higher rate than expected by the International Monetary Fund, which had reported a significant slowdown for both.

The International Monetary Fund now expects the US economy to grow by 2.1% in 2024, a slight decrease from the 2.5% that was expected in 2023.

The International Monetary Fund considered this improvement “due to the growth achieved in 2023, which was larger than what the Fund expected.”

  • Meanwhile, the Chinese economy grew by 4.6% this year, down from 5.2% last year.

  • As for India, the International Monetary Fund expects it to achieve growth of 6.5% this year, an increase of 0.2% from last October, after a growth rate of about 6.7% in 2023.

  • The fund also raised the growth prospects for Russia, Iran and Brazil for next year.

Europe's challenges

While many Asian economies are seeing continued improvement, Europe continues to weigh on the global outlook, with the International Monetary Fund highlighting “remarkably weak growth in the euro area.”

  • Germany's economy is expected to once again record the slowest growth in the G7, with an increase of only 0.5% this year after contracting by 0.3% in 2023.

  • Britain, France and Italy are also expected to grow by 1% or less this year.

  • The Spanish economy is expected to perform slightly better, with growth of 1.5%.

The International Monetary Fund explained in the report that weak growth in the euro area reflects “weak consumer confidence and the continuing impact of high energy prices.”

However, it seems that the general picture in 2024 will be less bleak than expected for many countries, as all countries mentioned in the report, with the exception of Argentina, are expected to achieve positive growth this year.

This is an improvement compared to 2023, when estimates expected a contraction of 4% of the 30 economies mentioned in the report, according to the International Monetary Fund.

Source: Al Jazeera + agencies