Economic output across the Middle East, North Africa and Pakistan is projected to shrink by 1.3 percent in 2026, according to the International Monetary Fund, because a war led by the US and Israel against Iran interferes with energy output, maritime shipping, tourism, and commerce.
A strong rebound is anticipated by the fund for 2027, with regional production expected to expand by 6.6 percent.
During a regional economic outlook presentation in Dubai on Thursday, the IMF explained that the war has impacted economies irregularly. Energy exporters experienced heavier strain from interruptions to fuel production and transport, whereas oil importers demonstrated greater stability.
While a recovery is expected in 2027, the IMF noted that production in impacted nations will generally stay under pre-war projections. The baseline projection relies on the assumption that hostilities will subside early in 2027 and commerce will slowly normalize during that year.
IMF Warns Energy Disruptions Could Worsen Outlook
Uncertainty surrounding the projections remains unusually severe, the fund cautioned. Additional interruptions to fuel extraction and shipping lanes might drive energy costs upward, and stricter external financial terms could increase economic strain.
Financial conditions might also be influenced by investor reevaluations of productivity gains linked to artificial intelligence, the IMF cautioned. Elevated interest rates, alongside worries regarding inflation and state budgets, may introduce further complications.
According to the IMF, oil importing nations displayed better stability, aided by internal consumption, money transfers, tourism income, favorable financial environments, and government policies intended to protect buyers from elevated commodity expenses.
Economic expansion in the Caucasus and Central Asia is projected at 5.2 percent for 2026, dropping to 5 percent in 2027 as expansion settles toward a sustainable rate.
Governments were advised by the fund to focus on price stability while preserving balanced public budgets and central bank autonomy. Authorities were also encouraged to implement structural overhauls to boost output and generate employment while addressing the financial fallout of the hostilities.
