IMF sees 1.3 percent contraction for Middle East, North Africa and Pakistan in 2026
The International Monetary Fund expects economic output across the Middle East, North Africa and Pakistan to contract by 1.3 percent in 2026, according to its regional economic outlook presented in Dubai on Thursday, with a 6.6 percent rebound projected for 2027.
The fund attributes the downturn to the conflict involving the United States, Israel and Iran, which it says is disrupting energy production facilities, major shipping lanes, tourism and cross-border trade. Analysts cited in the outlook describe the fallout as substantial but uneven: oil-exporting economies exposed to maritime disruption and damage to energy infrastructure face the sharpest contractions, while oil-importing economies have shown greater resilience to direct supply chain shocks. The IMF nonetheless warns that output across most regional markets is likely to stay below pre-war baseline projections.
The baseline recovery assumes the conflicts gradually abate in early 2027, allowing trade routes and commercial shipping to normalise over the following year. The fund cautions that this outlook carries exceptionally high uncertainty: renewed damage to energy facilities could push global oil prices sharply higher, and external financing conditions could tighten quickly if investors reassess productivity gains or central banks raise interest rates.
Oil-importing economies have held relatively steady on strong remittances, domestic tourism and targeted government interventions, with prompt fiscal responses credited with shielding consumers from rising commodity prices. Output in the Caucasus and Central Asia is moderating towards about five percent growth. The IMF urged regional governments to prioritise price stability and fiscal sustainability, and international advisers stressed protecting central bank independence and pursuing structural reform.
The projections matter for Pakistan as an oil importer in the grouping, where higher energy prices and tighter external financing would weigh on an economy already working through fiscal adjustment. The fund's recovery case rests on restoring energy infrastructure and reopening maritime transit routes, and it said it will update projections as conditions evolve.
