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Saudi Arabia caught in ‘perfect storm’ - by Katy Barnato

The Middle East's largest economy faces dwindling economic growth and a sharp drop in government revenues, hit by a toxic mix of tumbling oil prices, regional conflicts and the strength of the U.S. dollar, regional experts warned.

On Wednesday, the International Monetary Fund (IMF) warned that the large decline in oil prices and sharp drop in energy revenues would see the economy slow both this year and next in Saudi Arabia.

It forecast that real gross domestic product (GDP) would grow by 2.8 percent in 2015 and 2.4 percent in 2016, down from 3.5 percent last year. Oil revenue was seen contributing 24.2 percent to GDP this year, down from 32.6 percent in 2014.

"Risks to the growth outlook are tilted to the downside," the IMF said in Wednesday's report, which followed a visit by its economists to Riyadh in May.

"The main downside risks are the possibility of lower oil prices due either to weaker global demand or increased supply, the possibility that domestic reforms do not generate a growth dividend and create a more diversified and self-sustaining private sector that creates jobs and reduces inequality and an escalation of regional tensions that undermines confidence and investment," it continued.
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