he International Monetary Fund (IMF) on Tuesday lowered economic outlook for the Middle East region to 2.3 per cent this year from a May prediction of 3 per cent.The economic outlook for the Middle East has weakened this year amid expectations of lower oil production in crude-exporting countries and continuing political upheaval in Syria and Egypt, IMF said in a report.The Fund is expecting the economy to pick up in 2014 as global conditions improve and oil production recovers.The region’s oil exporters — Algeria , Bahrain, Iran, Iraq, Kuwait, Libya, Oman, Qatar, Saudi Arabia, the UAE and Yemen — are facing a temporary setback in headline growth amid domestic oil supply disruptions and lower global demand, but most continue to post solid non-oil growth , the report saysThe IMF now expects the region’s oil production to fall this year for the first time since the global financial crisis because of disruptions to output in Iraq and Libya and a “modest fall” in production in Saudi Arabia,  one of the world’s biggest exporters. While growth is expected to return to a 3.6 per cent pace next year, the IMF said its outlook was far from a sure thing.“Substantial downside risks weigh on this outlook, and, more worrisome, growth will remain well be low levels necessary to reduce the region’s high unemployment and improve living standards,” the report said. “In this setting, the region risks being trapped in a vicious cycle of economic stagnation and persistent sociopolitical strife, underlining the urgent need for policy action that will enhance confidence, growth and jobs.”The IMF expects growth in the GCC’s state spending to slow further in coming years; it forecasts an average rise of just over 4 per cent annually in 2013-2018, compared to the 15 per cent clip seen over the last decade.The combined budget surplus of 11 Arab oil exporters, including those in North Africa, is now projected to decline to 4.2 per cent of gross domestic product in 2013  from 6.3 per cent last year. In April this year, the IMF projected a 4.7 per cent surplus for 2013. Even as spending grows too fast, revenues are threatened by the risks of lower oil prices and a drop in global demand for Arab oil , the IMF added. Oil export receipts account for over 80 per cent of government revenues in the region, and the IMF said the most important threat to revenues was now the possibility of excess supply in the global oil market.“Notwithstanding the tightness caused by unexpected production disruptions and elevated geopolitical risks in the summer of 2013, a combination of weak global oil demand growth and strong supply growth from unconventional sources in the non-Opec countries could reduce demand for Opec oil by about a half-million barrels per day by 2016,” the IMF said. Most Arab oil exporters now need an oil price above $90 to balance their budgets at forecast production levels, the IMF said. Rising volatility in oil production meant uncertainty over revenues would increase, it said.