The International Monetary Fund slashed its 2009 economic growth forecast for the Gulf region by more than half to 1.3 percent as the three largest oil-exporting economies, including Saudi Arabia, shrink in a global slowdown.

The IMF, which said in February Gulf states were set to grow 3.5 percent this year, warned on Sunday of downside risks from sustained low oil prices and any further deterioration in bank balance sheets due to exposure to weakening real estate markets

The Gulf states consisting of it’s the Middle East, North Africa, Afghanistan, and Pakistan is being is region through three indirect channels.

First, the sharp drop in oil prices is shrinking revenues for oil exporters but also import costs for oil importers. Second, the contraction in global demand and trade is lowering export, tourism, and remittances receipts. And third, the tightening of international credit markets and lower investor appetite for risk are reducing asset prices and slowing down investment and capital inflows, the IMF said.

It expects overall GDP growth of oil exporters to decline sharply about 2.3 percent in 2009 from 5.4 percent in 2008 driven mainly by cuts in oil production and in line with OPEC’s agreement.

“Given the global reach of the current economic crisis, countries in the Middle East and North Africa will also be negatively affected,” IMF Middle East and Central Asia Department Director Masood Ahmed said.

However, it expected to fare better than many others countries such of that European Union and the United States, which are projected to shrink 4.0 percent and 2.8 percent respectively due to high public spending.

The world's top oil exporters in Arab countries are expected to slow by more than one third to 1.3 percent GDP growth rate this year, and Middle East oil exporters would face current account deficits of $9.6 billion this year from $397.8 billion in 2008.

It also expects oil prices to range $52-53 this year and it estimates that the Gulf Cooperation Countries (GCC) countries would lose about $290 billion exports receipts due to lower oil prices compared to last year.

Oil prices jumped 70 percent on Friday up to $58 a barrel.

Pakistan Afghanistan OPEC