IMF Projects Economic Contraction in Middle East and North Africa in 2026

The International Monetary Fund forecasts a 1.3% contraction in the GDP of the Middle East and North Africa region in 2026, due to a shock in the oil sector. This was stated in a report released on Thursday amid ongoing supply chain disruptions caused by the US-Iran conflict and its global economic repercussions. The report noted that if the conflict subsides and trade returns to normal, economic growth could rebound to 6.6% in 2027, supported by recovery in oil-exporting Gulf countries. It confirmed that the conflict caused a significant shock to regional economies, with varied impacts across countries. Oil-exporting nations directly affected experienced disruptions in energy production and exports, while many oil-importing countries showed relative resilience thanks to domestic demand, remittances, tourism, and policy support. The report highlighted that rising food and energy prices, shipping disruptions, and increased uncertainty led to severe impacts on economic activity and heightened inflationary pressures. Nevertheless, businesses, households, and governments adapted by rerouting supply chains, drawing from inventories, and providing subsidies, helping to contain economic fallout. In October, the IMF projected global growth to remain steady at 3.1% in 2026, supported by advances in artificial intelligence despite the oil shock. Global markets are experiencing significant volatility due to the US-Israeli conflict with Iran, causing higher oil prices, inflation, and slower growth. The decline in purchasing power from rising fuel costs has sparked protests in several European countries, including France, Italy, and Belgium.