IMF Forecasts 1.3% Economic Contraction for MENAP Region

The International Monetary Fund forecast a 1.3% contraction in economic output for the Middle East, North Africa, and Pakistan in 2026. The organization attributes this decline to the impact of the United States and Israeli-led war against Iran, which has disrupted trade, tourism, shipping, and energy production.

While the IMF predicts a rebound to 6.6% growth in 2027, it notes that output will likely remain below pre-war projections. The economic impact is uneven, as oil-exporting nations suffer more significant losses than oil importers, who have remained resilient through policy responses and remittances.

The outlook remains clouded by exceptionally high uncertainty. The IMF warned that the main risks involve further disruptions to trade routes and energy production that could drive energy prices higher. Additionally, the organization cautioned that tightening external financial conditions could occur if interest rates rise due to inflation or if investors reassess AI-driven productivity gains.