IMF Forecasts 1.3% GDP Contraction in Middle East, North Africa and Pakistan in 2026 on Iran War

The International Monetary Fund on Thursday forecast a 1.3% contraction in economic output across the Middle East, North Africa and Pakistan in 2026, citing the Iran war's toll on energy production, shipping, tourism, trade and confidence. The IMF projected 6.6% growth in 2027 but warned output would remain below pre-war projections. Gulf Cooperation Council economies are expected to contract in 2026 except Oman, with Bahrain, Kuwait, Qatar and Iraq forecast to post double-digit GDP declines. Saudi Arabia and the United Arab Emirates are also projected to enter recession. Jihad Azour, the IMF's director for the Middle East and Central Asia, said the downgrade is "concentrated among the economies most directly affected by the conflict." The baseline assumes the conflict abates in early 2027 and trade normalizes gradually, though the IMF flagged "exceptionally high uncertainty" and a prolonged conflict as the principal risk. Caucasus and Central Asia growth was forecast at 5.2% in 2026 and 5% in 2027.