World Bank Explains to Asharq Al-Awsat Saudi Growth Forecast Surge for 2025

Roberta Gatti, Chief Economist for the Middle East and North Africa (MENA) region at the World Bank (Asharq Al-Awsat)
Roberta Gatti, Chief Economist for the Middle East and North Africa (MENA) region at the World Bank (Asharq Al-Awsat)
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World Bank Explains to Asharq Al-Awsat Saudi Growth Forecast Surge for 2025

Roberta Gatti, Chief Economist for the Middle East and North Africa (MENA) region at the World Bank (Asharq Al-Awsat)
Roberta Gatti, Chief Economist for the Middle East and North Africa (MENA) region at the World Bank (Asharq Al-Awsat)

The World Bank is forecasting a 5.9% growth for Saudi Arabia’s economy in 2025, surpassing previous estimates. This surge is fueled by heightened non-oil activities and anticipated increases in oil prices, as explained by Roberta Gatti, Chief Economist for the Middle East and North Africa (MENA) region at the World Bank.

The bank now expects the Kingdom’s economy to expand by 5.9% next year, a significant increase from its earlier prediction of 4.2%. It also forecasts a 4.8% growth in the non-oil private sector in Saudi Arabia this year.

Speaking to Asharq Al-Awsat, Gatti explained that the higher forecast for Saudi Arabia’s economy next year relies on two main factors:

Firstly, boosting non-oil activities through loose fiscal policy, large investments (especially public ones), and strong private spending, all while keeping inflation low with generous subsidies.

Secondly, expecting a significant rise in oil production in 2025 due to current trends and extending oil production cuts until mid-2024, leading to a 5.9% GDP growth.

Economic Shocks and Debt Impact

Discussing a report about conflict and debt in the MENA region, Gatti highlighted how conflict exacerbates major weaknesses in the region, notably the surge in debt compared to GDP.

Over the past decade, most regional economies saw their debt levels rise, a trend accelerated by the pandemic.

By 2023, debt had climbed to 88% of GDP in oil-importing countries, up from 81% in 2013. Importantly, debt levels are much higher for oil-importing nations, averaging 88% of GDP in 2023 compared to 34% for oil-exporting ones.

Gatti stressed the importance of transparency in debt management, particularly for oil-importing nations. She also underscored the need to address off-budget expenditures, which are not officially recorded.

She warned that financial adjustments made to handle high interest payments might not fully tackle the increasing debt burdens resulting from off-budget spending. This is especially pertinent for oil-importing countries in the MENA region, Gatti noted.

Oil-exporting nations face the task of broadening their economic and financial sources due to shifts in global oil markets and rising demand for renewable energy.

Gatti explained that uncertainty in the MENA region, already higher than in other emerging markets and developing countries, intensified after October 7 (the start of the conflict between Israel and Hamas) and remains higher than in those regions.

While noting that the report assumes no escalation in conflict, she cautioned about its lasting effects.

As per Gatti, studies show that debt patterns after conflict differ from other disasters. Debt tends to rise after nearly any natural disaster, and GDP growth drops in the disaster year. But growth rebounds in the following years.

After armed conflict, debt spikes significantly, like in any disaster. However, economic recovery post-conflict doesn’t happen, meaning government actions after fighting may not boost economic growth. This means pre-existing debt vulnerabilities could worsen if conflict escalates in the Middle East and North Africa.



OPEC Again Cuts 2024, 2025 Oil Demand Growth Forecasts

The OPEC logo. Reuters
The OPEC logo. Reuters
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OPEC Again Cuts 2024, 2025 Oil Demand Growth Forecasts

The OPEC logo. Reuters
The OPEC logo. Reuters

OPEC cut its forecast for global oil demand growth this year and next on Tuesday, highlighting weakness in China, India and other regions, marking the producer group's fourth consecutive downward revision in the 2024 outlook.

The weaker outlook highlights the challenge facing OPEC+, which comprises the Organization of the Petroleum Exporting Countries and allies such as Russia, which earlier this month postponed a plan to start raising output in December against a backdrop of falling prices.

In a monthly report on Tuesday, OPEC said world oil demand would rise by 1.82 million barrels per day in 2024, down from growth of 1.93 million bpd forecast last month. Until August, OPEC had kept the outlook unchanged since its first forecast in July 2023.

In the report, OPEC also cut its 2025 global demand growth estimate to 1.54 million bpd from 1.64 million bpd, Reuters.

China accounted for the bulk of the 2024 downgrade. OPEC trimmed its Chinese growth forecast to 450,000 bpd from 580,000 bpd and said diesel use in September fell year-on-year for a seventh consecutive month.

"Diesel has been under pressure from a slowdown in construction amid weak manufacturing activity, combined with the ongoing deployment of LNG-fuelled trucks," OPEC said with reference to China.

Oil pared gains after the report was issued, with Brent crude trading below $73 a barrel.

Forecasts on the strength of demand growth in 2024 vary widely, partly due to differences over demand from China and the pace of the world's switch to cleaner fuels.

OPEC is still at the top of industry estimates and has a long way to go to match the International Energy Agency's far lower view.

The IEA, which represents industrialised countries, sees demand growth of 860,000 bpd in 2024. The agency is scheduled to update its figures on Thursday.

- OUTPUT RISES

OPEC+ has implemented a series of output cuts since late 2022 to support prices, most of which are in place until the end of 2025.

The group was to start unwinding the most recent layer of cuts of 2.2 million bpd from December but said on Nov. 3 it will delay the plan for a month, as weak demand and rising supply outside the group maintain downward pressure on the market.

OPEC's output is also rising, the report showed, with Libyan production rebounding after being cut by unrest. OPEC+ pumped 40.34 million bpd in October, up 215,000 bpd from September. Iraq cut output to 4.07 million bpd, closer to its 4 million bpd quota.

As well as Iraq, OPEC has named Russia and Kazakhstan as among the OPEC+ countries which pumped above quotas.

Russia's output edged up in October by 9,000 bpd to about 9.01 million bpd, OPEC said, slightly above its quota.