IMF sees 1.3% contraction in Middle East, North Africa and Pakistan in 2026
SPY•The IMF forecast a 1.3% contraction in output across the Middle East, North Africa and Pakistan in 2026, followed by 6.6% growth in 2027. It warned that further disruptions to energy production and trade routes could worsen the outlook.
1. Regional outlook
The IMF forecast that economic output in the Middle East, North Africa and Pakistan would contract by 1.3% in 2026 because of the war's impact on energy production, shipping, tourism, trade and confidence. It projected a rebound to 6.6% growth in 2027, while saying output would generally remain below pre-war projections.
2. Uneven impact
Oil-exporting economies have been hit harder by disruptions to energy production and shipping, while oil importers have proved more resilient, the IMF said. Its baseline assumes the conflict abates in early 2027 and trade gradually normalizes during the year, but the fund warned of exceptionally high uncertainty.
3. Risks and policy
The IMF said further disruption to energy production and trade routes could push energy prices higher, and external financial conditions could tighten. It urged policymakers to prioritize price stability, preserve fiscal sustainability and central bank independence, and enact structural reforms to boost productivity and create jobs.
