The Washington-based 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. In the fund’s Global Financial Stability Report published in early October, 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 1 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.

“The downward revision reflects surprises that suppressed activity in early 2018 in some major advanced economies, the negative effects of the trade measures implemented or approved between April and mid-September, as well as a weaker outlook for some key emerging markets and developing economies arising from country-specific factors, tighter financial conditions, geopolitical tensions and higher oil import bills,” said the fund.