Key points:

• IMF It is expected that regional economies will shrink by 1.3% in 2026.
• If trade returns to normal, growth could rebound by 6.6% next year.
• Oil disruptions threaten the recovery of Gulf economies

The International Monetary Fund ( IMF ) predicts that the economies of the Middle East, North Africa, and Pakistan will shrink by 1.3% in 2026, followed by a rebound of 6.6% next year. IMF warns that prolonged conflicts and renewed disruptions to energy supply could undermine this recovery.

This latest forecast was announced on October 15th, representing a clear reversal from the region's growth rate of 3.3% expected for 2025. However, IMF reminds that the anticipated rebound in 2027 depends on the recovery of oil production and the return of shipping routes to normal.

The director of the Middle East and Central Asia Department, IMF, Jihad Azour, stated that the distribution of economic damage is "highly uneven," with countries directly affected by the conflicts facing particularly severe pressures.

IMF expects the economy to shrink by 1.3% amid the impact of oil disruptions on growth.

The latest outlook for IMF reflects the consequences of disrupted energy exports, damaged infrastructure, and reduced commercial activities on the economy of that region.

Conflicts involving Iran have affected oil and natural gas production, shipping through the Strait of Hormuz, as well as trade routes that connect Gulf economies to the international market.

Although oil exports from the Gulf region have partially recovered from earlier disruptions, production losses and transportation restrictions continue to drag down economic activity.

IMF It is expected that oil-producing countries directly affected by war will experience a significant contraction in 2026, followed by stronger growth as energy production recovers.

However, the expected rebound may not necessarily restore economic output to the levels originally anticipated before the conflict.

Why is there still uncertainty in the 6.6% recovery forecast for IMF?

The optimistic forecast for 2027 by IMF assumes that trade and shipping will return to normal in the first quarter, with exports gradually picking up by the middle of the year.

This scenario highly depends on the repair of energy infrastructure and the re-opening of major transportation routes.

The vulnerability in this region is particularly evident in the diesel market, with damaged refineries and interrupted exports leading to a persistent global fuel shortage.

At the briefing on October 15th, Azour warned that emergency reserves, alternative routes, and pre-war financial provisions helped to absorb the initial impact, but these mitigatory measures could not provide unlimited protection.

Tight oil inventories are another challenge, especially when new disruptions prevent producers from replenishing their depleted reserves.

The recovery of Gulf economies will be differentiated by 2027.

Different countries are expected to face significantly different economic outcomes.

Qatar's natural gas infrastructure has suffered significant damage, but the authorities have accelerated the repair work. Saudi Arabia and the United Arab Emirates are also facing pressures due to disrupted trade, weakened investment, and increased regional uncertainty.

At the same time, oil-importing countries are more resilient than those economies that are directly exposed to production losses.

IMF It is expected that Central Asia and the Caucasus region will grow by 5.2% in 2026 and 5% in 2027, which is lower than last year's 6.2%. This highlights the differences in the impact on neighboring regions.

At the same time, the emergency release of oil helped to buffer the global energy market, but such interventions cannot completely replace the ongoing regional production.

IMF urges policymakers to maintain price stability, rebuild fiscal reserves, and enhance the ability to cope with future shocks.

For investors, the key issue is whether energy production and regional shipping can return to normal quickly enough to support this anticipated recovery.

Therefore, the 6.6% growth forecast given by IMF seems more like a conditional rebound in years of severe disruption, rather than indicating that the economic consequences of the conflict have disappeared.