The Washington-based International Monetary Fund (IMF) has lowered its growth projections for the Middle East, North Africa and Afghanistan and Pakistan for 2016 and 2017.

GDP growth in 2016 and 2017 were cut by 0.3 and 0.5 percentage points respectively, to 3.6 per cent for both years.

Saudi Arabia’s GDP growth forecasts were slashed by 1 percentage point for each year, to 1.2 per cent in 2016 and 1.9 per cent in 2017.

 IMF projections for GDP growth in the region and Saudi Arabia

IMF WEO projections

The revisions were due to a faster than expected slowdown in the Chinese economy, further falls in oil prices and other commodities, and rising Federal Reserve interest rates in the US.

The global economy growth forecast was reduced to 3.4 per cent in 2016 and 3.6 per cent in 2017 in the latest World Economic Outlook.

The low oil prices are affecting oil exporters’ fiscal position and growth, while also affecting their domestic demand. Demand in oil importers has not picked up as much as in past periods of low oil prices.

In many emerging and developing countries, lower fuel costs are not passed on to consumers due to subsidy and other systems setting prices.

GDP growth in the Middle East is still expected to pick up despite regional conflicts and instability.

The hikes in US Federal Reserve rates will also impact GCC countries that have to mirror the moves to preserve currency pegs, despite low inflation and liquidity.

The IMF sees several risks which could further slow growth, including commodity prices falling even lower, debt payment issues in emerging markets as the cost of finance rises, and lower than expected economic growth in China.