The economic growth forecast for oil exporting countries in the Middle East has been revised down for 2019, the International Monetary Fund (IMF) said Monday in its report titled Regional Economic Outlook: Middle East, North Africa, Afghanistan, and Pakistan (MENAP).
The IMF now estimates economic growth in MENAP oil exporters, except countries affected by conflict and Iran, to be 1.3% in 2019 -- a downward revision of 0.9 percentage points since its April 2019 forecast.
While economic growth in these countries was 1.6% in 2018, the IMF said growth would pickup in 2020 to reach 2.8% as activity in the oil and natural gas sectors are expected to provide some support.
"Downside risks are significant. Lower global demand and oil production could potentially weaken oil prices, business confidence, and investment decisions, with adverse implications for growth and fiscal and external positions," the report said.
In addition to weak global economic growth, rising fiscal vulnerabilities, high geopolitical tensions and volatility in crude oil prices also play an important role in weak growth in MENAP oil exporting countries, according to the report.
"To reduce dependence on oil prices and pave the way for more sustainable growth, fiscal consolidation needs to resume, underpinned by improved medium-term fiscal frameworks," the IMF said, stressing that structural reforms and financial sector development would boost investment.
- Iran needs oil at $194
Since the U.S. began re-implementing sanctions on Iran since November 2018, Iran has been highly restricted in its oil exports, which continues to have a negative impact on its economy.
The IMF said it forecasts a contraction in the Iranian economy by 9.5% this year, but said it would remain almost flat next year with near-zero growth with expectations of some stability in the output level.
However, the IMF warned that Iran would need crude oil prices to increase significantly to average $194.60 per barrel in 2020 to balance its budget.
The price of international benchmark Brent crude was trading around $61 a barrel on Monday.
By Ovunc Kutlu