The economy of oil-rich Saudi Arabia is expected to face growth restrictions at least for the next two years, the International Monetary Fund said.

The IMF said in an update to its seminal World Economic Outlook Saudi Arabia's economy will slow from 3.4 percent growth last year to 1.2 percent in 2016 and 1.9 percent next year. Globally, the IMF said developing economies declined for the fifth year in a year while growth in advanced economies has been only modest.

Globally, the growth forecast was cut by 0.2 percent from the last WEO issued in October. Crude oil prices have fallen by about 40 percent since then.

"Lower oil prices strain the fiscal positions of fuel exporters and weigh on their growth prospects," the report read.

The Saudi Finance Ministry in late December reported total revenue for fiscal year 2015 at $162 billion, an estimated 15 percent decline from budgeted revenues. Oil revenues are expected to reach $118 billion, a decline of 23 percent from the previous year.

For the year, the finance ministry said gross domestic product was expected to increase by 3.4 percent, and the oil sector is expected to grow by 3.06 percent. The latest figures from the United States show a GDP growth rate of around 2 percent.

On crude oil prices, the IMF said recovery isn't expected until next year. While oil started its decline in 2014, the IMF said the worst of the recent contraction came during 2015.

"With the projected pickup in growth being once again weaker than previously expected and the balance of risks remaining tilted to the downside, raising actual and potential output through a mix of demand support and structural reforms is even more urgent," the IMF said.

The Saudi government said it was embracing a set of policies and structural reforms meant to reduce the economic dependency on oil. Part of the five-year reform policy includes the privatization of some sectors of the Saudi economy.