The International Monetary Fund has forecast that economic output across the Middle East, North Africa, and Pakistan will contract by 1.3% in 2026, reflecting the severe impact of regional conflict, disrupted energy production, and declining business confidence.
The latest regional economic outlook highlights growing pressure on economies that have experienced interruptions to oil and gas production, international shipping, tourism, and trade.
According to the IMF, the ongoing conflict involving Iran has significantly weakened economic activity across several countries, with energy-exporting economies facing some of the most substantial disruptions.
The organization expects several Gulf economies to experience economic contractions this year, with particularly severe conditions in countries where oil and gas infrastructure or export operations have been affected.
Bahrain, Kuwait, Qatar, and Iraq are among the economies facing especially difficult conditions, while Saudi Arabia and the United Arab Emirates are also expected to record weaker economic performance than previously projected.
The economic consequences extend beyond the energy industry, affecting transportation networks, international trade flows, investment activity, tourism, and consumer confidence.
Higher energy costs and disrupted shipping routes have also contributed to inflationary pressure, increasing operating expenses for businesses and reducing purchasing power among households.
The IMF noted that oil-importing economies have generally demonstrated greater resilience, supported in some cases by remittances, tourism revenues, and government policy measures.
Despite the challenging outlook for 2026, the organization expects a significant regional recovery in 2027, forecasting economic growth of approximately 6.6%.
However, the projected rebound would not fully compensate for the economic activity lost during the conflict, leaving output below levels previously anticipated before the crisis.
The IMF warned that prolonged geopolitical instability, additional disruptions to energy infrastructure, and tighter international financial conditions could weaken the recovery further.
The organization emphasized the importance of maintaining monetary and fiscal stability, protecting central bank independence, and introducing reforms that support investment, productivity, and employment.
The latest forecast highlights the vulnerability of regional economies to geopolitical instability and energy market disruptions, while underscoring the importance of economic diversification and long-term financial resilience.
