IMF cuts Middle East growth forecast

Geopolitical_risksOngoing geopolitical tension, a drop in oil production and falling foreign direct investment (FDI) will all contribute to a slowdown in growth in the Middle East region, according to the latest forecast from the International Monetary Fund (IMF). The latest World Economic Outlook report from the IMF and the UN’s Commission for Trade and Development (UNCTAD) states that growth for the Middle East and Central Asia region is expected to reach 2.8% in 2020, 0.1% lower than the forecast made in October. Growth in the Middle East will recover in 2021 when it is forecast to reach 3.2%. This contrasts with the IMF’s changes to global growth forecasts. While the 2020 figure has been similarly cut by 0.1%, the global forecast for 2021 has also been cut by 0.2% since the October report. The downgrade for the Middle East is largely a reflection of the revised economic outlook for Saudi Arabia based on reduced oil production, said IMF chief economist Gita Gopinath. The IMF has cut its 2020 growth forecast for the kingdom by 0.3% to 1.9% but has retained the 2.2% growth forecast made in October for 2021. "We still have to assess how far the regional geopolitical tension goes,” said Gopinath when presenting the report at the World Economic forum in Davos. “By looking at the market response and oil price, the reaction has been muted. We have seen some increase in oil price of $3-$4 a barrel but it all depends on how geopolitical tension takes shape.” Ongoing geopolitical tension is also likely to affect several economies in the Middle East. As well as the prospect of military conflict in Iran, the IMF also cites social unrest in Iraq and Lebanon and civil conflict in Syria, Yemen and Libya Meanwhile, UNCTAD figures showed that FDI is down in the region. Although Saudi Arabia enjoyed a 9% increase in overseas investment, there was a 16% drop in the region as a whole, down from $30 billion in 2018 to $25 billion in 2019. Flows to Turkey were especially hit, falling from $13 billion in 2018 to $8.3 billion in 2019. ©2020 funds global mena

Executive Interviews

INTERVIEW: ‘Financing is the blood of Iran’s economy’

Amid a fresh wave of American sanctions, Romil Patel spoke to Meysam Hamedi, director of financial markets and instruments at Iran’s Securities & Exchange Organization (SEO).

INTERVIEW: Totally mega

In 2016, global consulting firm PWC forecast the emergence of five global ‘megatrends’ in the next two decades. Stephen Anderson, its Middle East clients and markets leader, talks about their...

INTERVIEW: Protecting the investment

Rasmala’s trade finance fund recently passed $100 million in assets. Doug Bitcon, head of credit strategies, explains why he has to be hands-on.

EXECUTIVE INTERVIEW: A natural interest in the topic

Since 2016, Guillermo Ortiz has been a chairman of Latin America’s BTG Pactual. The former central banker of Mexico talks to Nick Fitzpatrick.


Middle East Investor Roundtable 2020: Dimensions of diversification

Investors in the Middle East consider the tools that will be needed to navigate the Covid-19 crisis, the continued appetite for dividend and why it’s all about tech. Chaired by Romil Patel.

South Africa asset management roundtable: Global rebound on ice

Experts discuss the investment implications of the coronavirus pandemic, a delayed rebound in global growth and dealing with South Africa’s energy issues head on. Chaired by Romil Patel in Cape Town.

South African roundtable: Taking the bull by the horns

Our panel discusses Chinese investment in Africa, financial institutions’ contribution to economic sustainability and regulatory concerns. Chaired by Romil Patel in Cape Town.

ROUNDTABLE: Hooked to the global caravan

With the MENA region at a tipping point, our panellists talk about economic diversification, the impact of regulation and the delayed Saudi Aramco listing. Chaired by Romil Patel in Dubai.