Tuesday, 02 January 2024 12:17 GMT

IMF revises forecast for Middle Eastern economies downward over oil caps, war


(MENAFN) The International Monetary Fund (IMF) has revised its growth forecast for Middle Eastern economies downward, citing oil production caps and the ongoing Israel-Gaza conflict as key factors influencing this change. In its latest update of the World Economic Outlook, released on Tuesday, the IMF highlighted that the global economy, which demonstrated resilience last year, is now in a “sticky spot.” This situation is characterized by a slowing pace of disinflation and the looming prospect of a prolonged period of high interest rates.

While the IMF has maintained its global growth projection for 2024 at 3.2 percent, it anticipates a slight acceleration to 3.3 percent in 2025. This outlook is consistent with the forecasts made in April, though the underlying details show shifts in growth composition across different regions. According to IMF chief economist Pierre-Olivier Gourinchas, despite a broadly unchanged economic forecast for the coming years, certain near-term risks have gained prominence.

One of the primary concerns highlighted by the IMF is inflation, which remains a significant challenge even as global efforts to control it have shown some success. The organization expects global inflation to decrease to 5.9 percent this year, down from 6.7 percent last year. However, progress in disinflation has been slower in some advanced economies, particularly in the United States, where the risks of rising inflation could undermine previous gains.

The IMF noted that the momentum for global disinflation is faltering, suggesting potential obstacles ahead. These challenges may compel central banks, including the U.S. Federal Reserve, to maintain higher borrowing costs for an extended period. Such a scenario poses risks to overall economic growth and could lead to upward pressure on the dollar, which may adversely affect emerging and developing economies. As these dynamics unfold, the IMF remains cautious about the economic outlook, balancing risks while acknowledging the complexities ahead.

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