Key takeaways IMF forecasts 1.3% regional economic contraction in 2026 Growth could rebound 6.6% if trade normalizes Oil disruptions threaten recovery across Gulf economies The International
The International Monetary Fund expects the Middle East, North Africa and Pakistan economy to contract 1.3% in 2026 before rebounding 6.6% next year, warning that prolonged conflict and renewed energy disruptions could undermine the recovery.
The latest forecast, presented on October 15, marks a dramatic reversal from the region's 3.3% growth in 2025. However, the IMF cautioned that the projected 2027 rebound depends on oil production recovering and shipping routes returning to normal.
Jihad Azour, the IMF's director for the Middle East and Central Asia, said the economic damage has been highly uneven, with countries directly affected by the conflict facing particularly severe pressure.
IMF Forecasts 1.3% Contraction as Oil Disruptions Hit GrowthThe IMF's latest outlook reflects the economic consequences of disrupted energy exports, damaged infrastructure and reduced commercial activity across the region.
The conflict involving Iran has affected oil and gas production, shipping through the Strait of Hormuz and trade routes connecting Gulf economies with international markets.
Although Gulf oil exports have partially recovered from earlier disruptions, production losses and transportation constraints continue weighing on economic activity.
Year Regional GDP Growth IMF Assessment 2025 +3.3% Expansion 2026 −1.3% Economic contraction 2027 +6.6% Conditional recoverySource: IMF, October 15, 2026. Forecasts cover the Middle East, North Africa and Pakistan.
The IMF expects oil-exporting countries directly affected by the war to experience substantial contractions in 2026, followed by stronger growth as energy production resumes.
However, the projected rebound would not necessarily restore economic output to levels anticipated before the conflict.
Why the IMF's 6.6% Recovery Forecast Remains UncertainThe IMF's optimistic 2027 projection assumes normal trade and shipping resume during the first quarter, with exports gradually recovering by midyear.
That scenario depends heavily on the restoration of energy infrastructure and the reopening of major transportation routes.
The region's vulnerability is particularly visible in diesel markets, where damaged refineries and disrupted exports have contributed to persistent global fuel shortages.
At the October 15 briefing, Azour warned that emergency inventories, alternative shipping routes and pre-war financial reserves had helped absorb the initial shock but could not provide unlimited protection.
The oil inventory squeeze presents another challenge, particularly if renewed disruptions prevent producers from rebuilding depleted reserves.
Gulf Economies Face Uneven Recovery Through 2027Individual countries are expected to experience sharply different economic outcomes.
Qatar faces substantial damage to natural gas infrastructure, although authorities have accelerated restoration efforts. Saudi Arabia and the UAE also face pressure from disrupted trade, weaker investment and higher regional uncertainty.
Oil-importing countries, meanwhile, have demonstrated greater resilience than economies directly exposed to production losses.
The IMF expects the Caucasus and Central Asia to grow 5.2% in 2026 and 5% in 2027, following 6.2% growth last year, highlighting the different impact across neighboring regions.
Meanwhile, emergency oil releases have helped cushion global energy markets, although such interventions cannot fully replace sustained regional production.
The IMF urged policymakers to maintain price stability, rebuild fiscal reserves and strengthen their ability to withstand future disruptions.
For investors, the central question is whether energy production and regional shipping can normalize quickly enough to support the projected recovery.
The IMF's 6.6% growth forecast therefore represents a conditional rebound from a severely disrupted year, rather than evidence that the economic consequences of the conflict have already disappeared.
