Oil rises as Middle East attacks increase uncertainty over flows

The International Monetary Fund (IMF) has updated its economic projections for both Brazil and the Middle East and Central Asia. The São Paulo-based institution released its World Economic Outlook (WEO) report on Tuesday (13), indicating that Brazil's GDP growth will slow to 2.2% in 2023 from the previous forecast of 2.4% and further to 1.9% by 2027. The downward revision is attributed to the country's tight monetary policy, withdrawal of fiscal support, and global uncertainties.

In contrast, the Middle East and Central Asia, which encompasses both Arab and non-Arab nations, is set to experience a 0.3% contraction this year, compared to the previous forecast of 0.7%. However, the region is expected to see a robust 6.3% growth in 2027, up from the earlier projection of 6.5%. The downgrade of the region's economic outlook is primarily due to the closure of the Strait of Hormuz, which disrupts oil production and exports.

Bahrain, Iraq, Kuwait, and Qatar are anticipated to bear the brunt of the impact, with the IMF forecasting "double-digit" economic contractions in these countries this year, followed by strong recoveries in 2027.

Meanwhile, the IMF has also revised its global economic outlook, projecting an annual growth rate of 3.1% in 2023, up from the previous estimate of 3%. The outlook for 2027 remains unchanged at 3.4%. The fund attributes the near-term challenges to the complex interplay of geopolitics and technology, with technology currently driving a positive demand shock due to investments in artificial intelligence and related infrastructure. However, the long-term implications of these forces remain uncertain.