Saudi Crown Prince Mohammed bin Salman walks with Bahrain’s Crown Prince Salman bin Hamad bin Isa Al-Khalifa during a major investment conference in Riyadh, in a photo provided by the Saudi palace on October 24, 2018 (Bandar AL-JALOUD)

Dubai (AFP) – The International Monetary Fund on Monday lowered its 2019 economic growth forecast for Saudi Arabia and the region over low oil prices and crude output along with rising geopolitical tensions.

In its World Economic Outlook update for January, the global lender lowered its projection for Saudi Arabia’s gross domestic product growth this year to 1.8 percent, down from 2.4 percent in its October report.

However it raised its forecast for next year by 0.2 percentage points, to 2.1 percent.

Riyadh has projected 2.6 percent GDP growth for 2019.

The world’s top crude exporter, the kingdom has been hit hard by tumbling oil prices and saw its economy shrink by 0.9 percent in 2017.

It has since rebounded, with healthy 2.3 percent expansion in 2018, mainly thanks to higher oil prices and output.

The IMF also lowered its 2019 growth forecast for the region including the Middle East, North Africa, Afghanistan and Pakistan by 0.3 percentage points to 2.4 percent.

The report only provides a detailed country forecast for Saudi Arabia.

Weak oil output growth, tightening financing conditions in Pakistan, US sanctions on Iran and regional geopolitical tensions were at the root of the forecast, the IMF said.

Major Gulf oil exporters, including Saudi Arabia, have posted budget deficits since the crash of the global oil market in 2014.

Riyadh has posted an accumulated budget shortfall of $313 billion over the past five years and projects a $32 billion deficit for 2019.

Neighbouring Kuwait approved its national budget on Monday, projecting a significant deficit for a fifth year in a row due to low oil prices.

Kuwaiti Finance Minister Nayef al-Hajraf told reporters the 2019-2020 budget projected a shortfall of $20.1 billion, or 13 percent of gross domestic product.

Brent crude had hit $85 a barrel in early October, but prices plunged more than 40 percent over the following two months on oversupply and fears a trade war between the United States and China could slash demand.

They partially rebounded to just above $60 a barrel since a new deal came into effect, under which OPEC and non-OPEC oil producers agreed to trim output by 1.2 million bpd.

Oil prices have remained volatile in recent months, hitting $55 a barrel in early January.

The IMF said that “markets expected prices to remain broadly at that level over the next 4–5 years”.

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