The International Monetary Fund sharply reduced its 2026 growth forecast for the Middle East and North Africa to 1.1 per cent on Tuesday as war chokes Gulf oil and gas exports.
Iran, Iraq, and Qatar will be particularly hard-hit, the IMF’s World Economic Outlook warned, as it revised down its January prediction of 3.9 per cent regional growth this year.
Growth should rebound next year, as long as energy production and transport are “normalised” over the next few months, the IMF predicted. The region’s economies grew 3.2 per cent in 2025, it said.
The weeks-long war has hammered production facilities and all but closed the Strait of Hormuz — the gateway for the Gulf’s abundant energy resources to the rest of the world.
Gross domestic product in Iran, hit by intense US-Israeli bombing, will contract 6.1 per cent this year, the IMF said, slashing its January forecast by 7.2 percentage points.
In Qatar, whose main liquefied natural gas production site is badly damaged, GDP is expected to shrink 8.6 per cent. Iraq’s economy will contract 6.8 per cent, the IMF said.
“For commodity exporters directly affected by the conflict, diminished production and exports imply a severe downward revision of GDP growth projections for 2026,” the report said.
The scale of the impact depends “on the degree of damage suffered in energy and transportation infrastructure as well as the dependence on the Strait of Hormuz and availability of alternative export routes,” it added.
Economic damage “is therefore more pronounced for Bahrain, Iran, Iraq, Kuwait, and Qatar and less significant for Oman, Saudi Arabia, and the United Arab Emirates”.
Bahrain and Kuwait, both heavily targeted by Iran and dependent on Hormuz for exports, were tipped to shrink by 0.5 and 0.6 per cent respectively, from growth of more than 3.0 per cent last year.
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Saudi Arabia, the region’s biggest economy and the world’s top oil exporter, whose pipeline to the Red Sea gives it an alternative export route, is expected to grow 3.1 per cent, down 1.4 percentage points from January’s forecast.
The United Arab Emirates, which also has a pipeline bypassing the Strait of Hormuz, was projected to grow 3.1 per cent, dropping from 5.8 per cent last year.
“For all these economies, growth in 2027 is expected to rebound, based on the assumption that energy production and transportation are normalised over the next few months,” the IMF said.
But this assumption “may need to be revised if the duration of the conflict extends and the degree of damage suffered gets reassessed”, it warned.
Importing countries are also suffering from higher prices for energy and other commodities, the IMF said, citing Egypt, whose growth forecast was cut 0.5 percentage points to 4.2 per cent.
AFP
