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The IMF did not spare Saudi, UAE when lowering growth expectations for the globe

Difficult economic times ahead await the world. Why haven't Saudi, the UAE or the MENA region been spared?

The IMF said its latest World Economic Outlook projections that the 2019 GDP growth stands at 3.0%, down from 3.2% in a July forecast The kingdom’s gross domestic product (GDP) will expand 0.2% in 2019, down from the fund’s earlier estimate of 1.9% The UAE's 2019 growth outlook was slashed from 2.8% in April 2019 to 1.6%

The International Monetary Fund (IMF) sent a dire warning to the world when it dropped its growth estimates in the coming months, pointing more and more to difficult times ahead.

Global growth declining

The U.S.-China trade war will cut 2019 global growth to its slowest pace since the 2008-2009 financial crisis, the International Monetary Fund warned on Tuesday, but said output would rebound if their dueling tariffs were removed, Reuters reports.

The IMF said its latest World Economic Outlook projections here that the 2019 GDP growth stands t 3.0%, down from 3.2% in a July forecast.

Without a nearly simultaneous easing of monetary policy (quantitative easing or QE) by major central banks, IMF chief economist Gita Gopinath said global growth would be half a percentage point lower in 2019, or at 2.5%, teetering on the edge of widespread recession.

The global crisis lender said that by 2020, announced tariffs would reduce global economic output by 0.8%. That translates to a loss of about $700 billion — the equivalent of making Switzerland’s economy disappear.

For 2020, the Fund said global growth was set to pick up to 3.4% due to expectations of better performances in Brazil, Mexico, Russia, Saudi Arabia and Turkey.

Global trade growth reached just 1% in the first half of 2019, the weakest level since 2012, weighed down by higher tariffs and prolonged uncertainty about trade policies, as well as a slump in the automobile industry.

After expanding by 3.6% in 2018, the IMF now projects global trade volume will increase just 1.1% in 2019, 1.4 percentage points less than it forecast in July and 2.3 percentage points less than forecast in April.

Read: Warning lights flash red as weak US data fuels global economic gloom

Saudi economy

The International Monetary Fund just lowered its 2019 global growth forecast for a fifth straight time, but is turning far more downbeat on Saudi Arabia’s prospects, cutting its outlook for this year to just above zero. Among the biggest economies, only Italy will fare worse, it said.

The kingdom’s gross domestic product (GDP) will expand 0.2% in 2019, down from the fund’s earlier estimate of 1.9%, according to its World Economic Outlook published on Tuesday.

The IMF also expects a more modest pick-up next year, with a gain of 2.2%, Bloomberg reports.

 “While non-oil growth is expected to strengthen in 2019 on higher government spending and confidence, oil GDP in Saudi Arabia is projected to decline against the backdrop of the extension of the OPEC+ agreement and a generally weak global oil market,” the IMF said.

OPEC output cuts are playing a negative role on an economy where the energy sector accounts for about 50% of GDP, but also the recent attacks on Saudi oil infrastructure have increased economic risks.

The price of oil and gas, the main source of income for the region, dropped 13 percent between April and October and that oil prices will continue to decline until 2023.

Read: Private sector job creation key to economic diversification in Saudi

The UAE economy

The UAE’s 2019 growth outlook was slashed from 2.8% in April 2019 to 1.6%. In addition, next year’s growth was also cut by 0.8% to 2.5%. The IMF also projected a 2.5% growth rate over the next five years till 2024.

Meanwhile, the UAE Central Bank, last month, revised the country’s forecast upward by 0.4% to 2.4% for 2019, following a strong growth in the first quarter, led by the oil sector.

Iran’s growth slammed

The IMF said Iran’s economy will contract by a massive 9.5% this year.

The figure is 3.5 percentage points lower than the IMF’s April projections, reflecting a rapid deterioration in Tehran’s economy after the US implemented tighter sanctions on its oil exports, the nation’s main source of income.

Read: Check your economic and financial pulse: 4 heartbeats of global finance in September 2019

The MENA also

The IMF also cut its forecast for MENA growth to a meager 0.1% this year, 1.2 percentage points lower than April projections, reflecting weakening economies in a region rattled by conflict.

The cut to MENA growth is “largely due to the downward forecast revision for Iran and Saudi Arabia,” the IMF said.

“Civil strife in some other economies, including Libya, Syria, and Yemen, weigh on the region’s outlook.”

 The IMF also cut forecasts for other hydrocarbon exporters Qatar, Kuwait and Oman but raised the outlook for Iraq, the region’s second largest crude exporter, following a 0.6% contraction last year.