IMF sees 1.3% contraction in Middle East, North Africa and Pakistan in 2026

The IMF expects economic output across the Middle East, North Africa and Pakistan to shrink by 1.3% in 2026, attributing the decline to the US-Israeli-led war against Iran. Business Recorder reported that the Fund projects a 6.6% rebound in 2027, although output in the affected economies would generally remain below pre-war expectations.

The IMF said damage had varied across economies, with oil exporters more exposed to interruptions in energy production and shipping, while oil importers showed greater resilience. Its baseline assumes the conflict eases in early 2027 and trade gradually returns to normal, but the Fund warned that renewed disruption to energy output or trade routes could push energy prices higher; it also urged policymakers to protect price stability and fiscal sustainability.