The International Monetary Fund anticipates a significant decline in activity in a region affected by disruptions in energy, maritime transport, tourism, and trade.
The gross domestic product of the Middle East, North Africa, and Pakistan is projected to decline by 1.3% in 2026, according to the International Monetary Fund in its report published on Thursday, October 22.
The war led by the United States and Israel against Iran is disrupting energy production, maritime transport, tourism, trade, and economic confidence.
The IMF forecasts a rebound of 6.6% in 2027 if the conflict eases early in the year and trade gradually normalizes. Even in this scenario, activity would generally remain below projections established prior to the war, limiting the extent of the anticipated recovery.
The shock primarily affects oil exporters directly exposed to disruptions in energy production and transport. Economies in the Gulf Cooperation Council are expected to contract this year, with the exception of Oman. Bahrain, Kuwait, Qatar, and Iraq are projected to experience double-digit declines, while Saudi Arabia and the United Arab Emirates are also expected to enter recession.
Oil-importing economies are showing more resilience, supported by remittances from diasporas, tourism, favorable financial conditions, and public measures aimed at protecting consumers from rising commodity prices. Jihad Azour, director of the IMF’s Middle East and Central Asia department, emphasized that the significant downward revision is concentrated on countries most directly affected by the conflict.
These projections remain surrounded by exceptionally high uncertainty. The IMF’s baseline scenario assumes a de-escalation of the war by early 2027, while a prolonged conflict poses the main risk to the outlook. A further tightening of global financial conditions could also increase financing costs if interest rates remain high.
The institution urges governments to maintain price stability and public finances, as well as the independence of central banks, while continuing reforms aimed at improving productivity and employment. In the Caucasus and Central Asia, activity is expected to grow by 5.2% in 2026 and then by 5% in 2027, a slowdown that the IMF presents as a return to a more sustainable pace.
