The Middle East and mostly Gulf fossil fuel exporters tried to diversify the economy and avoided recession last year but the IMF lowered its MENA forecast to 2.9% this year.
Among the obvious causes are the volatile regional situation sparked by the Israel-Hamas war, Yemen-based Houthi attacks on the Red Sea and the threat of a direct US-Iran confrontation but also, the not so optimist anymore forecast is due to Saudi Arabia’s plummeting oil production in 2024.
Efforts to diversify Gulf economies beyond oil have started to bear fruit: The combined non-oil segment of Gulf economies has grown faster than the overall GDP in the last 20 years, but still Gulf economies’ growth is closely tied to fluctuating oil prices.
Government data released recently showed that Saudi Arabia’s GDP declined 0.9% in 2023 due to a drop in oil prices and cuts in output.
Saudi Arabia was the G20’s best performer in 2022, but one of the worst in 2023. And the trend appears to be still there as Riyadh is recording a sharp slowdown in January 2024.
The long-term outlook for Saudi Arabia’s oil economy also took a hit when Riyadh ordered state-owned energy giant Aramco to halt a plan to boost its maximum production capacity to 13 million barrels of oil per day.
Heading into 2023, Middle East economies were riding high after the region posted a 5.6% growth rate over the previous year but, a year later, the Middle East again stands out but on the brink of producing widespread economic pain.
The IMF said on Jan. 30 that the global economy is approaching a soft landing while upgrading its 2024 growth forecast to 3.1%, up 0.2 percentage points from its October projections. Simultaneously, the IMF pared its Middle East and North Africa (MENA) forecast 0.5 percentage points to 2.9%.
