Riyadh — The International Monetary Fund (IMF) on Monday raised its growth projection for the Saudi economy on the back of higher oil prices but retained its estimates for the region.

In its World Economic Outlook update, the IMF said the Saudi economy -- which shrank 0.7 percent last year -- is expected to grow by 1.6 percent in 2018, up 0.5 percent on its October estimates.

The Saudi economy is also projected to grow by 2.2 percent next year, up 0.6 percent on the previous estimate, it said.

The IMF, however, maintained its October projections for growth in the Middle East, North Africa, Afghanistan and Pakistan (MENAP) region at 3.6 percent and 3.5 percent for this year and 2019, respectively.

"While stronger oil prices are helping a recovery in domestic demand in oil exporters, including Saudi Arabia, the fiscal adjustment that is still needed is projected to weigh on growth prospects," the IMF said.

It said oil prices rose 20 percent between August and October of last year.

The Saudi economy, the largest in the region, contracted last year for the first time since 2009 when it dove into negative territory due to the global financial crisis.

The Kingdom has introduced a series of austerity measures to boost non-oil income, raising the prices of fuel and power, imposing fees and charges on expatriate labor and introducing a value-added tax (VAT) of five percent. — AFP