IMF lowers Saudi Arabia growth forecast to only 1.2 per cent in 2016
The International Monetary Fund has slashed its forecast for Saudi Arabia’s economic growth, as it blamed the slowing Chinese economy, the plunge in oil prices and a slowdown in emerging markets for a cut to the overall economic outlook for the world.
According to the forecast published by the National Newspaper, Saudi Arabia’s economy will grow at just 1.2 per cent in 2016 and 1.9 per cent the year after.
Both figures are one percentage point below the IMF’s October projection for growth in the kingdom, the world’s largest oil exporter.
In December, Saudi Arabia announced an austerity budget that seeks to slash spending by 13 per cent this year. Government spending accounts for about a third of the country’s GDP.
Calling the growth downgrade “a substantial cut”, William Jackson, senior emerging markets economist at Capital Economics, said: “It’s a late recognition of some of the realities facing Saudi Arabia.”
Government spending cuts are likely to be the main factor slowing growth in the Saudi economy, he added.
“But it was clear even before [the government’s] spending plans were outlined that spending would be cut, and that would hit the non-oil sector,” the paper cites Jackson as saying.