IMF forecasts 1% GDP contraction for Middle East, North Africa, Pakistan in 2026
by@Reuters
Summary
The International Monetary Fund (IMF) has projected a contraction of 1.3% in the GDP for the Middle East, North Africa, and Pakistan in 2026, primarily due to the ongoing conflict related to the Iran war, which adversely affects energy production, shipping, tourism, and trade. The IMF noted that while a sharp rebound of 6.6% growth is anticipated in 2027, the output for these economies will likely remain below pre-war forecasts. Factors such as elevated risks from a prolonged conflict and the varying impacts on oil-exporting versus oil-importing economies have contributed to a cloudy economic outlook, prompting recommendations for policymakers to focus on maintaining price stability and implementing structural reforms.
Analysis
Jihad Azour: Jihad Azour serves as the IMF's director for the Middle East and Central Asia department, overseeing regional analysis and policy recommendations. He addressed the press conference on the new outlook, emphasizing that the sharp downgrade stems from economies most directly impacted by the conflict and highlighting risks of prolonged disruptions. International Monetary Fund: The International Monetary Fund is an international financial institution that promotes global monetary cooperation, financial stability, and sustainable economic growth while providing policy advice and support to member countries. In this development, the IMF issued its latest regional economic outlook for the Middle East, North Africa, and Pakistan, attributing the forecasted contraction primarily to the effects of the Iran war on energy production and related sectors. Conflict Risks: A more prolonged conflict stands as the principal downside risk that could further cloud the economic prospects for the region. Policy Recommendations: Policymakers are advised to focus on preserving price stability, ensuring fiscal sustainability, upholding central bank independence, and implementing structural reforms to enhance productivity. Regional Economic Outlook: The IMF baseline scenario assumes the conflict will subside early next year, allowing for a rebound in growth as trade gradually normalizes.
Categories
macropolitics