IMF cuts Middle East growth, citing conflict and dwindling oil supplies – BNN Bloomberg

(Bloomberg) — The International Monetary Fund cut its forecasts for economic growth in the Middle East and North Africa, citing conflicts, geopolitical uncertainty and lower oil production.

Growth is expected to be 2.1% this year, according to the Washington-based lender’s regional economic forecast released Thursday, down from an estimate of 2.7% in April. The IMF slightly lowered its forecast for next year to 4%.

If ongoing conflicts persist or spread, there could be “long-term economic losses,” the IMF report said. “Economies undergoing important structural reforms may face growing social discontent and political resistance, which will hamper policy implementation and hold back growth.”

Last week the IMF cut its global growth forecast for next year to 3.2% and warned of worsening risks from wars and trade protectionism. The lender credited central banks for curbing inflation without plunging countries into recession.

“The economy is recovering, but under conditions of high uncertainty,” Jihad Azur, the IMF’s director for the Middle East, North Africa and Central Asia, said in an interview.

He said fighting between Israel and Iran-allied militant groups and the civil war in Sudan – the region’s most serious conflicts – had a “ripple effect”.

“Any escalation could have more serious consequences for the region,” he said.

According to Azur, another factor that could affect regional growth is the extension of the OPEC+ agreement on production cuts. The group of oil exporters includes Saudi Arabia, the United Arab Emirates and Iraq.

The alliance, led by Saudi Arabia and Russia, could begin increasing production in December as it gradually restores supplies that have been stalled since 2022. But it has already delayed the restart, originally planned for October, amid weakening oil demand in China and increased production elsewhere.

Those cuts led the IMF to cut its growth forecasts for Saudi Arabia, the region’s largest economy, several times last year.

However, “the growth of the non-oil sector in the Gulf Cooperation Council has been robust and has been the driving force behind growth over the past few years,” Azur said, referring to the six-nation group.

Azur said another challenge for the IMF is the region’s inability to attract sufficient foreign direct investment, as well as high levels of debt in middle-income countries.

He said economic uncertainty will remain high as long as regional wars continue.

“Uncertainty is extremely high, and the impact of uncertainty varies,” Azur said. “For some countries in conflict, they need immediate support and emergency assistance.”

Other states around the conflict zone, including Egypt, Jordan and Iraq, “must be defensive to maintain their macroeconomic stability,” he said.