IMF forecasts 1.3% output 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% in 2026, as the war against Iran disrupts energy production, shipping, tourism, trade and confidence, the fund said in its regional outlook released in Dubai on Thursday. It projects a rebound to 6.6% growth in 2027, though output in those economies would generally remain below pre-war projections.
The IMF described the war's impact as substantial but uneven. Oil-exporting economies were hit harder, being directly exposed to disruptions in energy production and shipping, while oil importers proved more resilient, with domestic demand supported by remittances and tourism flows, favourable financial conditions and prompt policy responses that shielded consumers from higher commodity prices.
The baseline assumes the conflict abates in early 2027 and trade gradually normalises during that year, but the fund said the outlook remains clouded by "exceptionally high uncertainty." It flagged further disruption to energy production and trade routes as the main risk, warning that this could drive energy prices higher. External financial conditions could also tighten if investors reassess artificial intelligence-driven productivity gains and interest rates rise further amid concerns about inflation and fiscal positions, it said.
For Pakistan, an oil importer, the fund's framing points to the same pressures weighing on other importers in the region: energy costs, trade routes and remittance flows. The IMF did not set out country-specific figures for Pakistan in the outlook as described.
Growth in the Caucasus and Central Asia was moderating toward a more sustainable pace, the fund said, forecasting 5.2% output growth in 2026 and 5% in 2027. Repeating the message it delivered at last week's annual meetings, the IMF urged policymakers to prioritise price stability while preserving fiscal sustainability, maintaining central bank independence and enacting structural reforms to boost productivity and create jobs.
