(Bloomberg) -- The International Monetary Fund has downgraded its growth projections for Saudi Arabia by more than any other major economy it tracks, reflecting the kingdom’s decision to reduce oil supplies.
Saudi gross domestic product will rise by 1.7% in 2024, according to the fund, less than the Washington-based lender’s prediction of 2.6% in April. It also lowered the projection for 2025 to 4.7% from 6%.
That compares to the IMF’s estimate that global GDP will climb 3.2% this year and the US’s by 2.6%.
Slower growth may weigh on Saudi government revenues at a time when it’s raising billions of dollars of debt to fund Crown Prince Mohammed bin Salman’s plans to transform the economy.
The downward revision is “entirely due to the impact of the production cuts,” Petya Koeva Brooks, deputy director at the IMF, said to reporters after it published its latest World Economic Outlook on Tuesday.
The Saudi government, along with other members of the OPEC+ cartel, reduced crude output in 2023 to prop up oil prices. Those curbs have been prolonged well into next year.
While Brent crude is up around 9% this year to just under $84 a barrel, it’s below what Riyadh needs to balance its budget. The IMF calculates the government needs a price of around $96 for that.
Bloomberg Economics says the break-even price is even higher, at $109 a barrel, if the sovereign wealth fund’s domestic investments are included.
The world’s biggest crude exporter lowered production to 9 million barrels a day last year, roughly 1 million barrels below its average of the past decade. That move triggered a contraction in what was the Group of 20’s fastest-growing economy in 2022.
The government has long focused on growing its non-oil economy, where the vast bulk of Saudis are employed and which the crown prince’s Vision 2030 plan is aimed at reshaping. That has also showed signs of easing, accelerating at the slowest pace since the coronavirus pandemic during the first quarter of 2024.
The revision to Saudi Arabia’s growth likely weighed on growth projections for the wider region. The IMF cut its estimates for the Middle East and Central Asia to 2.4% this year from 2.8% earlier.
--With assistance from Grant Smith.
(Updates with quote from IMF official.)
©2024 Bloomberg L.P.
