IMF says Houthi attacks have limited impact on Saudi economy
The Gulf kingdom's strong domestic demand and robust public sector are cushioning the impact, although geopolitical uncertainty remains a threat.
The International Monetary Fund (IMF) suggests that attacks by the Houthi group based in Yemen, which are supported by Iran, have had only a limited impact on the Saudi Arabian economy thus far, according to the IMF's regional director, Jihad Azour. The group has intensified its attacks on Saudi Arabia lately, focusing on oil facilities, airports, and other targets as Yemen's civil war has reignited.
Despite Iran's blockade of the Strait of Hormuz and the Houthi declaration of a maritime blockade, Saudi Arabia's crude shipments continue to flow, Azour reported to AFP.
The kingdom benefits from robust domestic demand and a strong public sector, which helps mitigate the impact of the Houthi attacks. However, the economy is projected to shrink by 3.3% this year due to the consequences of the US-Israeli war with Iran that started in February. The IMF's recent regional report, released on Thursday, noted that all Gulf states except Oman have experienced declines in their hydrocarbon production.
While the IMF anticipates a robust recovery of about 9.1% growth next year, the outlook is clouded by ongoing geopolitical tensions and diplomatic stalemate between the United States and Iran.
Iranian Revolutionary Guards have warned of expanding the conflict if the US military persists in escorting ships through the Strait of Hormuz. Reports suggest that both Washington and Israel may launch a new wave of strikes on Iran, potentially after the American midterm elections on November 3. If fighting resumes and further damage to infrastructure occurs, Azour cautioned that the impact could be more significant.
The IMF's projections are based on an oil price that remains stable but is significantly lower than pre-war levels in case of intensified conflict.
Azour emphasized that the ability of Saudi Arabia to attract investment and talent hinges on stability. Although scars will persist for a few years from the war, he highlighted that the fundamentals of the Saudi economy remain strong.
Written by urgent.news from Free Malaysia Today's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
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