Saudi Arabia, the world’s top oil exporter, faces a major economic contraction this year, the IMF said Tuesday, as deadly attacks by Yemen’s Houthis squeeze a country already suffering from the Middle East war.
Saudi Arabia’s GDP is expected to shrink by 3.3 per cent, the International Monetary Fund said in its latest World Economic Outlook report, predicting a regional drop over Iran’s blockading of the Strait of Hormuz.
The report was compiled before 13 people were killed on Saturday — the deadliest attack in Saudi Arabia in more than a decade — during a series of lethal Houthi strikes on Riyadh’s international airport.
The kingdom was already facing headwinds from Iran’s chokehold on Hormuz, a vital shipping route for oil and gas, since the start of the Middle East war in February, when the US and Israel attacked Iran.
But the restart in July of Yemen’s frozen civil war, pitting a Saudi-led coalition backing the internationally recognised government against the rival Houthis, has further roiled the kingdom and brought the fight to its own soil.
Houthi attacks have targeted Saudi oil facilities, oil tankers in the Red Sea — Saudi Arabia’s alternative export route — and transport hubs including airports.
Blasts resounded over the Saudi capital again late on Monday, with the Saudi coalition saying it had intercepted a Houthi missile and the group announcing it had once again targeted the airport, whose operations remain suspended.
In the evening, mobile phones received a government alert warning of a “hostile aerial threat”, before the announcement of the interception.
Saturday’s airport attack prompted US President Donald Trump to say he was considering joining Saudi strikes against the Houthis, after having reportedly rebuffed previous requests for help from the kingdom.
The Houthis warned the US against intervention, with political bureau member Mohammed Al Bukhaiti telling AFP they would target American interests in the region.
Bukhaiti said the purpose of the campaign against Saudi targets was to send a message to the crown prince “that he can no longer wage aggression against Yemen from a safe position”.
Riyadh’s coalition has supported Yemen’s government militarily since 2015, in a long-running civil war that has created a deeply entrenched humanitarian crisis in the impoverished country.
In its latest global report, the IMF said the regional economy was projected to contract by 0.3 per cent this year, compared to its projected 1.9 per cent growth six months ago.
It cited “a longer closure of the Strait of Hormuz, compared with the baseline assumptions in the April” report, predicting a major rebound in 2027 based on the expected reopening of the waterway.
Since the Middle East war began in late February with US-Israeli strikes on Iran, Tehran has sought to impose its control over the Strait of Hormuz, repeatedly attacking ships that transit without its authorisation.
The US has imposed its own counter-blockade on Iranian ports, and has escorted friendly ships through the waterway in increasing numbers.
The fund noted that Saudi Arabia is among the least affected exporters in the region, pointing to “an economy with more diversified export routes”.
Saudi Arabia has made use of its East-West oil pipeline to bypass the Hormuz Strait and send crude to its Red Sea coast.
However, the pipeline was temporarily shut in September after it was hit by strikes blamed on Iran-backed groups in Iraq.
AFP