FILE PHOTO: A view of the International Monetary Fund (IMF) logo at its headquarters in Washington, D.C., U.S., November 24, 2024. REUTERS/Benoit Tessier/File Photo

By Rachna Uppal

DUBAI (Reuters) -The International Monetary Fund upgraded its 2025 economic growth forecast for Saudi Arabia on Tuesday due to a faster-than-expected unwinding of oil production cuts in the world's top crude exporter.

In its latest World Economic Outlook, the IMF lifted its forecast for Saudi Arabia's GDP growth in 2025 to 4%, from 3% it projected in April. Growth in 2026 was revised slightly higher to 4% as well.

Accelerating growth in the oil and gas exporters of the Gulf states was expected to also lift growth in the broader Middle East and Central Asia region, the IMF said, "as the effects of disruptions to oil production and shipping dissipate and the impacts of ongoing conflicts abate."

It now projects regional GDP growth of 3.5% percent in 2025, versus 3% forecast in April, and up from 2.6% last year. GDP in 2026 is projected to increase 3.8%.

"This largely reflects developments in Gulf Cooperation

Council countries, in particular Saudi Arabia, where the unwinding of oil production cuts was faster than expected, and Egypt, where the outturn in the first half of 2025 was better than expected," the IMF said.

Saudi Arabia, the world's top crude exporter, is in the midst of a vast economic transformation plan known as Vision 2030 intended to help diversify revenue sources away from hydrocarbons and increase non-oil growth. It is investing massively in sectors such as tourism, manufacturing, and advanced technology.

But voluntary oil production cuts and lower oil prices have led to a decrease in revenue and widening fiscal deficits, as well as a scaling back of some projects.

Non-oil growth vastly outperformed overall real GDP growth of 3.6% in the first half of 2025, the finance ministry said in a pre-budget statement last month, up 4.8% in the same period, and contributed more than 55% to total GDP.

(Reporting by Rachna Uppal; Editing by Kim Coghill)