IMF Forecasts 1.3% Economic Contraction Across Middle East, North Africa and Pakistan
The International Monetary Fund (IMF) expects economic output across the Middle East, North Africa and Pakistan to contract by 1.3 percent in 2026 as the US and Israeli led war against Iran disrupts energy production, shipping, tourism and trade.
The fund forecasts a sharp recovery in 2027, with regional output projected to grow by 6.6 percent.
In its regional economic outlook released in Dubai on Thursday, the IMF said the conflict had affected economies unevenly. Oil exporting countries have faced greater pressure from disruptions to energy production and shipping, while oil importing economies have proved more resilient.
The IMF expects the region’s economy to rebound in 2027, but said output in affected economies would generally remain below levels projected before the war. Its baseline forecast assumes the conflict will ease in early 2027 and trade will gradually return to normal over the course of the year.
IMF Warns Energy Disruptions Could Worsen Outlook
The fund warned that the outlook remained subject to exceptionally high uncertainty. Further disruptions to energy production and trade routes could push energy prices higher, while tighter external financial conditions could add to economic pressure.
The IMF also warned that investor reassessments of artificial intelligence driven productivity gains could affect financial conditions. Higher interest rates, alongside concerns about inflation and government finances, could further complicate the outlook.
Oil importing economies have shown greater resilience, supported by domestic demand, remittances, tourism receipts, favorable financial conditions and policy measures designed to shield consumers from higher commodity prices, the IMF said.
The IMF forecast economic output growth of 5.2 percent in the Caucasus and Central Asia in 2026, slowing to 5 percent in 2027 as growth moves toward a more sustainable pace.
The fund urged policymakers to prioritize price stability while maintaining sustainable public finances and central bank independence. It also called for structural reforms to raise productivity and create jobs as governments respond to the economic effects of the conflict.
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