Middle East, North Africa and Pakistan GDP to contract 1.3% in 2026: IMF

The International Monetary Fund (IMF) has projected a significant contraction in GDP for the Middle East, North Africa and Pakistan in 2026, with a forecast of -1.3%. The decline is attributed to the Iran war's impact on energy production, shipping, tourism, trade and investor confidence. While economic growth is expected to surge to 6.6% in 2027, the IMF cautions that further disruptions to energy production could exacerbate the outlook.

The conflict's uneven effects have direct hits on oil-exporting economies like several Gulf states, leading to potential recessions. Oman remains the exception among Gulf Cooperation Council (GCC) economies, which are projected to experience double-digit declines in GDP. Bahrain, Kuwait, Qatar, Iraq, Saudi Arabia and the United Arab Emirates are all anticipated to face economic downturns in 2026.

The IMF's outlook is clouded by exceptionally high uncertainty, with the principal risk being a prolonged conflict. External financial conditions could tighten if investors reassess AI-driven productivity gains and interest rates rise further amid inflation and fiscal concerns. The IMF urges policymakers to focus on maintaining price stability, fiscal sustainability, central bank independence and implementing structural reforms to boost productivity and job creation.