DUBAI, Oct 22 (Reuters) – The International Monetary Fund (IMF) forecasts a 1.3% contraction in economic output across the Middle East, North Africa, and Pakistan in 2026 due to the ongoing conflict involving the US and Israel against Iran. This decline is attributed to the battle's negative effects on energy production, shipping, tourism, trade, and overall economic confidence.
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The IMF's report indicates that while the region will see a rebound to 6.6% growth in 2027, overall output will still lag behind pre-war expectations. The report highlighted the uneven impact of the war, with oil-exporting countries suffering more from the disruptions compared to oil-importing nations, which have shown greater resilience.
The IMF's baseline scenario assumes the conflict will subside by early 2027, leading to a gradual normalization of trade. However, the outlook is marked by “exceptionally high uncertainty.” Risks to this forecast include potential further disruptions to energy production and trade routes, which could elevate energy prices, as well as tightening financial conditions if investor confidence wavers.
The resilience observed in oil importers is supported by strong domestic demand driven by remittances and tourism, favorable financial conditions, and effective policy responses that protect consumers from rising commodity prices.
In related analyses, the IMF reports moderating growth in the Caucasus and Central Asia, predicting a 5.2% increase in economic output for 2026 and a 5% rise in 2027. The organization continues to emphasize the importance of maintaining price stability, fiscal sustainability, and central bank independence while also enacting structural reforms to enhance productivity and job creation.
(Reporting by Andrea Shalal; Editing by Saad Sayeed)