Washington-based IMF has raised its oil price projections for 2018, but expects oil prices to average $68.76 a barrel in 2019 before lowering further to $60 a barrel in 2023.

“Oil prices are expected to average $69.38 a barrel in 2018 (higher than the April 2018 WEO [World Economic Outlook] projection of $62.30 and the 2017 price of $52.80 a barrel). Global oil supply is expected to gradually increase over the forecast horizon, lowering oil prices to $68.76 a barrel in 2019, and further to about $60 a barrel in 2023,” the fund said in its Global Financial Stability Report published in early October.

The price of Brent crude was $84.80 a barrel on 10 October. Despite its projections for a more modest oil price, the IMF has upgraded its growth forecasts for Saudi Arabia’s economy. The move comes despite downgrades to the overall projections for the Middle East and the rest of the world.

The IMF now expects the Saudi economy to grow by 2.2 per cent in 2018 and 2.4 per cent in 2019, a 0.5 percentage point improvement on the forecasts it made in April. It says the improvement is “driven by a pickup in non-oil economic activity and a projected increase in crude oil production in line with the revised Opec Plus agreement”.

For the broader Middle East, North Africa, Afghanistan and Pakistan region, the IMF forecasts growth to increase from 2.2 per cent in 2017 to 2.4 per cent in 2018 and 2.7 per cent in 2019, stabilising at about 3 per cent in the medium term. This is a downward revision for each year of one percentage point compared with the IMF forecast in April.

The downward revisions for the Middle East reflect the worsening growth prospects for Iran following the reimposition of US sanctions. Its economy is now forecast to contract by 1.5 per cent in 2018 and 3.6 per cent in 2019, before returning to modest positive growth in 2020-23.

Global growth is now projected at 3.7 per cent for 2018-19, some 0.2 percentage points lower for both years than forecast by the IMF in April. The fund says it has changed its global forecasts because downside risks have increased, while the potential for upside ‘surprises’ has receded.