IMF sees 1.3pc contraction in Pakistan this year due to Iran war

The International Monetary Fund expects economic output across the Middle East and North Africa to shrink by 1.3pc in 2026, citing the US-Israeli-led war against Iran and its effects on energy production, shipping, tourism, trade and confidence. In its regional outlook released Thursday in Dubai, the Fund said activity was expected to rebound in 2027, while generally remaining below pre-war projections.

The IMF’s baseline assumes the conflict eases in early 2027 and trade gradually returns to normal, but it warned that further disruption could push energy prices higher and worsen the outlook. Oil-exporting economies have been hit harder, while importers have shown greater resilience; the Fund also urged policymakers to protect price stability, fiscal sustainability and central bank independence.