The International Monetary Fund issued an update to its 2017 World Economic Outlook on Monday, generally maintaining its previous growth forecasts for the world, but saying that the Middle east could face slower economic activity.
“Growth in the Middle East, North Africa, Afghanistan, and Pakistan region is projected to slow considerably in 2017, reflecting primarily a slowdown in activity in oil exporters, before recovering in 2018”, IMF said.
Oil prices, which had somewhat rebounded to above $50 a barrel, have declined in recent months, as some producers push to increase production and shale oil output in the United States keeps rising.
IMF says that in 2016, the Middle East had a growth rate close to 5%, which was higher than previously forecast. But in 2017 the growth is expected to be 2.6%.
One of the reasons the region’s growth was better than expected last year, was a rebound in Iran’s growth, due to increased oil exports after international sanctions were lifted following the 2015 nuclear deal.
But IMF warns in its updated report that “The recent decline in oil prices, if sustained, could weigh further on the outlook for the region’s oil exporters.”
Radio Farda’s economy analyst Fereidoun Khavand believes that if oil prices drop below $45 a barrel, Iran’s economic growth will slow down significantly to a range of 0-2%.
IMF has also reduced Saudi Arabia’s growth rate from its April estimates to 0.1%, which is the worst performance for the oil rich country since 2009.
On the world stage, IMF has sounded a more optimistic tone on the Eurozone and China economic growth prospects, while expressing more caution on the U.S. economic outlook, given political and legislative uncertainties.