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Although oil prices have risen from the lows they hit in the first quarter, economists are cutting again their GDP growth forecasts for the biggest Arab Gulf states for this year and next, according to the quarterly Reuters poll released on Thursday.
According to 18 private sector economists, the largest economy in the region and OPEC’s de facto leader, Saudi Arabia, will see its economy expand by 1.1 percent this year, a downward revision from the 1.2-percent growth analysts had predicted in the previous quarterly Reuters poll. In the July poll, the growth forecast was also lowered, from a 1.5-percent growth projection in April.
The latest quarterly Reuters poll showed that economists also expect Saudi Arabia’s economy to grow by 1.4 percent next year, compared to a 1.7-percent growth forecast in the previous poll.
Still, the higher oil prices, now at around US$50 compared to US$30 in the first quarter of this year, will help Saudi Arabia cut some of its fiscal deficit, which is now expected at 12.1 percent of GDP this year and at 7.8 percent in 2017. These projections compare to the previous poll’s expectations for a deficit of 13.5 percent this year and 9.4 percent next year.
The International Monetary Fund (IMF) sees Saudi Arabia’s deficit at 13 percent of GDP this year, following a 15.9-percent deficit reported for 2015.
In today’s poll, economists are also lowering their economic growth forecasts for the Gulf Arab region’s second-biggest economy, the United Arab Emirates (UAE), to 2.3 percent from 2.5 percent for 2016, and to 2.5 percent from 2.7 percent for 2017.
On Wednesday, the IMF said that the low oil prices are still weighing heavily on Middle Eastern producers and they would need to make spending cuts to plug their budget gaps. In addition, the IMF said that the Gulf Cooperation Council (GCC) economies need deep structural reforms to attract foreign investments and boost private sector activity to diversify away from their overreliance on oil and public spending.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.