The International Monetary Fund now expects economic activity in the Middle East, North Africa and Pakistan to contract by 1.3% in 2026, compared with the 1.4% growth it had forecast in April. The 2.7-percentage-point downgrade reflects the scale of disruption from the war involving Iran, according to regional forecasts released on Thursday, 22 October.
The damage extends beyond energy production and shipments to maritime transport, tourism and trade. For the region's economies, these disruptions complicate business supply chains and put pressure on revenues earned from exports and travel.
The shock varies markedly across countries. According to the IMF, oil exporters whose production and shipments have been disrupted have been hit hardest. Several importing economies have shown more resilience because of remittances, tourism, financing conditions and measures to support consumers.
For North African economies included in the forecast, the 1.3% contraction applies to the regional aggregate and does not mean that each country is entering a recession. Outcomes differ depending on reliance on hydrocarbons, imports and service industries.
The IMF envisages a 6.6% rebound in 2027 if the conflict eases early in the year and trade gradually normalises. Even under that scenario, activity would generally remain below the levels projected before the war, with further risks from disrupted shipping routes and tighter external financing.