Economic growth in the oil exporters in the Middle East and North Africa will shift from oil to the non-oil sectors due to lower crude production as part of the OPEC+ agreement, the International Monetary Fund (IMF) said in its latest regional outlook published on Wednesday.
Economic growth is set to moderate in oil-exporting countries in the Middle East – which are some of the world’s biggest oil exporters, including top crude exporter Saudi Arabia – according to the IMF. That’s due to the OPEC+ cuts decided late last year, and the fresh production cuts announced last month that would run between May and December 2023.
“As a result, growth in the MENA region is projected to decelerate from 5.3 percent in 2022 to 3.1 percent in 2023 before increasing slightly to 3.4 percent in 2024,” the IMF said.
Saudi Arabia led a group of several major OPEC+ producers who announced in early April a surprise 1.66 million bpd cut in production between May and December this year as “a precautionary measure aimed at supporting the stability of the oil market.”
“Real GDP growth for MENA oil exporters is expected to slow from 5.7 percent in 2022 to 3.1 percent in 2023 (and to broadly maintain that pace in 2024) as the main driver of growth in most oil exporters shifts to nonhydrocarbon activities, reflecting agreed oil production cuts.”
At the same time, non-oil GDP in oil-exporting countries is forecast to rise by around 3.7% this year, broadly unchanged from 2022, thanks to the positive momentum in the retail and service sectors in Kuwait, Saudi Arabia, and the United Arab Emirates (UAE). This momentum will be sustained due to abundant liquidity, continued reform momentum, and rapid acceleration of private investment in Saudi Arabia, partially offsetting the impact of slow growth in major trading partners, according to the IMF.
But “Oil exporters should manage oil revenues carefully, avoid increasing current spending, and improve budget transparency,” the fund warned in the outlook.