UAE- IMF Further Cuts S. Arabia's Economic Growth Projections
(MENAFN- Arab Times) The International Monetary Fund further cut its growth projections for Saudi Arabia's oil-dependent economy for this year and next despite a rebound in crude prices. The IMF forecast growth of 2.8 percent this year, 0.2 percentage points down on its last report in April.
It also lowered its projection for 2016 to 2.4 percent - 0.3 percentage points down on its last World Economic Outlook Update.
In 2014, the Saudi economy grew by 3.5 percent.
The new gloomy projections come as Saudi Arabia maintains high spending and a costly military intervention in neighbouring Yemen despite a sharp fall in oil income, which contributes more than 90 percent of public revenues.
Saudi Arabia has projected a budget deficit of $39 billion for this year, but the IMF estimates the shortfall could exceed $130 billion, the largest in the kingdom's history.
In 2014, Saudi Arabia posted a budget deficit of $17.5 billion - only its second since 2002.
To finance spending, Riyadh has already withdrawn $52.3 billion from its fiscal reserves in the first five months of the year.
The reserves stood at $732 billion at the turn of the year and dropped to $679.7 billion at the end of May, according to Saudi Arabian Monetary Agency figures.
Oil prices crashed from around $115 a barrel in June last year to just $46 in January before recovering to around $60.
The IMF projected on Thursday that the price of benchmark Brent crude would average $59 a barrel this year.
It estimates that Saudi Arabia needs a price of more than $100 a barrel to balance its budget.
The world's largest exporter is currently pumping 10.3 million barrels of crude per day.
Meanwhile, the International Monetary Fund said Thursday that there was no reason to lose faith in China's economy because of the bursting stock market bubble.
IMF chief economist Olivier Blanchard said that the 30 percent meltdown in the Shanghai and Shenzhen markets since mid-June is "very much a sideshow" to the greater economy and would not undermine growth overall.
"There is no particular reason to have lost confidence," because of meltdown, he said in a press conference.
Growth
The spillover of the market rout into the economy is "likely to be small", he said, as the IMF reiterated its forecast for 6.8 percent growth in the world's second-largest economy this year.
The market "went up very quickly, it's coming down very quickly" Chinese people should be used to very wild gyrations in stock markets," he noted adding that it "won't be the last time."
He said Beijing should not try to prop up markets, but said their efforts to ease the pace of the plunge in stocks "may be a good thing."
"The government should realize that they cannot achieve some level of stock prices that they want," he said.
The International Monetary Fund lowered its 2015 global economic growth forecast citing a likely "temporary setback" from the United States in the first months of the year.
The IMF also highlighted the risk of "financial stress" in Europe from the Greek debt crisis and China's slowdown, but left forecasts for the eurozone and the Asian giant unchanged.
The Washington-based institution projected the world economy would grow 3.3 percent this year, less than the 3.5 percent pace it had forecast in April and slightly slower than 2014. The 2016 forecast was for a pick-up to 3.8 percent.
"Moderate growth continues, with an improving recovery in advanced economies, and a slowdown in underlying growth in emerging-market and low-income developing economies," said Olivier Blanchard, the IMF's chief economist, at a news conference.
According to the IMF, the downgrade of the global growth forecast largely reflects the contraction in the US economy in the first quarter amid severe winter weather, which spilled over to neighboring Canada and Mexico.
"The unexpected weakness in North America, which accounts for the lion's share of the growth forecast revision in advanced economies, is likely to prove a temporary setback," it said.
Because of the setback, the IMF lowered its forecast for the United States, the world's largest economy, by 0.6 percentage point to 2.5 percent. Canada's forecast was cut by 0.7 point to 1.5 percent, and Mexico's by 0.6 point to 2.4 percent.
Blanchard said that the US economy's soft first quarter, a 0.2 percent contraction, turned out to not be a sign of underlying weakness "now that the fog has largely cleared."
"Fundamentals are still solid, and the US recovery is on track," he said.
Greece's debt crisis, which could force it to abandon the euro, for the moment only was having a marginal effect on the expansion of the global economy, the IMF said in the update of its World Economic Outlook.
The institution left unchanged its forecasts for the eurozone at 1.5 percent, and for the two largest economies: Germany (1.6 percent) and France (1.2 percent).
"Developments in Greece have, so far, not resulted in any significant contagion. Timely policy action should help to manage such risks if they were to materialize," it said, noting the recovery in the eurozone seemed "broadly on track".
But the recent rise in interest rates on the sovereign bonds in some euro area economies could signal larger problems ahead. "Some risks of a reemergence of financial stress remain," it said.
It also lowered its projection for 2016 to 2.4 percent - 0.3 percentage points down on its last World Economic Outlook Update.
In 2014, the Saudi economy grew by 3.5 percent.
The new gloomy projections come as Saudi Arabia maintains high spending and a costly military intervention in neighbouring Yemen despite a sharp fall in oil income, which contributes more than 90 percent of public revenues.
Saudi Arabia has projected a budget deficit of $39 billion for this year, but the IMF estimates the shortfall could exceed $130 billion, the largest in the kingdom's history.
In 2014, Saudi Arabia posted a budget deficit of $17.5 billion - only its second since 2002.
To finance spending, Riyadh has already withdrawn $52.3 billion from its fiscal reserves in the first five months of the year.
The reserves stood at $732 billion at the turn of the year and dropped to $679.7 billion at the end of May, according to Saudi Arabian Monetary Agency figures.
Oil prices crashed from around $115 a barrel in June last year to just $46 in January before recovering to around $60.
The IMF projected on Thursday that the price of benchmark Brent crude would average $59 a barrel this year.
It estimates that Saudi Arabia needs a price of more than $100 a barrel to balance its budget.
The world's largest exporter is currently pumping 10.3 million barrels of crude per day.
Meanwhile, the International Monetary Fund said Thursday that there was no reason to lose faith in China's economy because of the bursting stock market bubble.
IMF chief economist Olivier Blanchard said that the 30 percent meltdown in the Shanghai and Shenzhen markets since mid-June is "very much a sideshow" to the greater economy and would not undermine growth overall.
"There is no particular reason to have lost confidence," because of meltdown, he said in a press conference.
Growth
The spillover of the market rout into the economy is "likely to be small", he said, as the IMF reiterated its forecast for 6.8 percent growth in the world's second-largest economy this year.
The market "went up very quickly, it's coming down very quickly" Chinese people should be used to very wild gyrations in stock markets," he noted adding that it "won't be the last time."
He said Beijing should not try to prop up markets, but said their efforts to ease the pace of the plunge in stocks "may be a good thing."
"The government should realize that they cannot achieve some level of stock prices that they want," he said.
The International Monetary Fund lowered its 2015 global economic growth forecast citing a likely "temporary setback" from the United States in the first months of the year.
The IMF also highlighted the risk of "financial stress" in Europe from the Greek debt crisis and China's slowdown, but left forecasts for the eurozone and the Asian giant unchanged.
The Washington-based institution projected the world economy would grow 3.3 percent this year, less than the 3.5 percent pace it had forecast in April and slightly slower than 2014. The 2016 forecast was for a pick-up to 3.8 percent.
"Moderate growth continues, with an improving recovery in advanced economies, and a slowdown in underlying growth in emerging-market and low-income developing economies," said Olivier Blanchard, the IMF's chief economist, at a news conference.
According to the IMF, the downgrade of the global growth forecast largely reflects the contraction in the US economy in the first quarter amid severe winter weather, which spilled over to neighboring Canada and Mexico.
"The unexpected weakness in North America, which accounts for the lion's share of the growth forecast revision in advanced economies, is likely to prove a temporary setback," it said.
Because of the setback, the IMF lowered its forecast for the United States, the world's largest economy, by 0.6 percentage point to 2.5 percent. Canada's forecast was cut by 0.7 point to 1.5 percent, and Mexico's by 0.6 point to 2.4 percent.
Blanchard said that the US economy's soft first quarter, a 0.2 percent contraction, turned out to not be a sign of underlying weakness "now that the fog has largely cleared."
"Fundamentals are still solid, and the US recovery is on track," he said.
Greece's debt crisis, which could force it to abandon the euro, for the moment only was having a marginal effect on the expansion of the global economy, the IMF said in the update of its World Economic Outlook.
The institution left unchanged its forecasts for the eurozone at 1.5 percent, and for the two largest economies: Germany (1.6 percent) and France (1.2 percent).
"Developments in Greece have, so far, not resulted in any significant contagion. Timely policy action should help to manage such risks if they were to materialize," it said, noting the recovery in the eurozone seemed "broadly on track".
But the recent rise in interest rates on the sovereign bonds in some euro area economies could signal larger problems ahead. "Some risks of a reemergence of financial stress remain," it said.
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