IMF says Houthi attacks have limited impact on Saudi economy

Houthi attacks on Saudi Arabia are having only a “limited” economic impact on the kingdom so far, owing to robust domestic demand, the IMF’s regional director told AFP, though geopolitical uncertainty remains a threat.

The Iranian-backed Yemeni group has ramped up its attacks on Saudi Arabia in recent weeks, hitting oil facilities and airports among other targets, as Yemen’s dormant civil war has roared back into life.

The world’s largest oil exporter, Saudi Arabia has had its crude shipments squeezed by Iran’s blockade of the Strait of Hormuz and the Houthis’ declaration of a maritime blockade.

However, shipments continue to move despite the conflicts, Jihad Azour told AFP.

The Gulf kingdom also has “strong internal demand and a robust public sector, so the impact is limited”, he said of the Houthi attacks.

Nevertheless, the economy is expected to contract by 3.3% this year, owing to the impacts of the US-Israeli war with Iran that began in February.

In its regional report released on Thursday, the IMF said that every Gulf state bar Oman had suffered reductions in its hydrocarbon production.

The economy of the region as a whole is expected to shrink 4.8% in 2026.

‘Scars’

Still, the IMF expects a strong rebound of around 9.1% growth next year, albeit with deep uncertainty amid the ongoing geopolitical tensions and stalled diplomacy between Washington and Tehran.

On Thursday, Iran’s Revolutionary Guards threatened to expand the conflict if the US military continues to escort ships through the Strait of Hormuz.

There have also been reports in the US and other media that Washington and Israel are preparing a new wave of strikes on Iran, possibly after the American midterm elections on Nov 3.

If fighting did resume and there was further damage to infrastructure, Azour warned, “the cost will be higher”.

“Our projections are based on an oil price that will remain stable, higher than it was before the war, but much lower than it would be if the region were to flare up or the conflict were to become more intense,” he cautioned.

“On the ability to attract investment and talent, everything will depend on stability,” he said.

Azour added that “scars will remain for a few years” from the war, but that “the fundamentals of the Saudi economy are strong”.

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