Economy to slow into 2019 — IMF
The International Monetary Fund used its January 2019 interim global economy update to cut its forecast for growth in 2019 to 1.8%, 0.6 percentage points below its October 2018 world economic outlook of 2.4% in 2019. It puts it back to its forecast in its April 2018 forecasts. The IMF said in Octo- ber growth was expected to pick-up further over the medium-term as the reforms take hold and oil output increases. Although economic growth accelerated in the third quarter of 2018, this was driven by oil activity that o set a slowdown in the non-oil sector that will be central to the Saudi vision of diversifying the economy away from hydrocarbons. Gross domestic product grew 2.5% from a year earlier. That was an acceleration from the second quarter, when GDP rose 1.6%. GDP growth picked up largely because of higher oil output. The oil sector expanded 3.7% from a year ago in the third quarter, after 1.3% in the second. Growth in the non-oil sector, which is central to and Saudi Arabia’s e ort to diversify its economy, slowed to 2.1% from 2.4%. This was echoed by gures showing that non-oil business sector su ered its weakest year in recent history. The head- line PMI published by Emirates NDB fell to 54.5 in December 2018 from 55.2 in November, on an index where any number over 50 indicates expansion.
Opec cuts to hit non-oil growth
The oil producers’ cartel Opec agreed a reduction in output of 1.2m barrels per day (bpd) at a meet- ing in December 2018 aimed at putting a oor under oil prices. The move was pushed through by Saudi Arabia, which is the dominant player in the group. Saudi Arabia will cut oil output from 10.6 m barrels per day (bpd) in October to around 10.2m bpd in January. It oil-based GDP gains in 2019 and 2020, will be limited and will re ect primarily increased gas production and crude ows needed to feed expanding re nery operations, according to NBK bank. Oil prices have failed to recover following the Opec decision meaning that Saudi Arabia will also su er from lower oil export revenue growth. Figures from the International Energy Agency showed that Saudi produc- tion fell to 10.64m bpd in December from 11.06m bpd the previous month, a fall of 4% but only half the cut that must be imposed by January 2019. Saudi Aramco has set out plans to focus on overseas gas acquisitions in the wake of the delays in the $4trn initial public o ering (IPO).