The International Monetary Fund now projects that output across the Middle East and Central Asia will fall 0.3 percent in 2026, a steep cut from the 1.9 percent growth it forecast in April. The fund’s latest outlook, released on Tuesday, links the downturn largely to the fallout from the US-Israel war on Iran.
Several countries are expected to suffer far deeper losses, with Kuwait, Qatar and Iraq among the worst affected. The region is the only one in the IMF’s forecasts expected to contract this year.
Strait of Hormuz disruption weighs on the regional outlook
The IMF attributed its downgrade mainly to prolonged disruption in the Strait of Hormuz. That waterway normally handles roughly a fifth of the world’s oil supply, so any interruption spreads widely through energy markets.
Kuwait, Iraq and Qatar face the steepest contractions
The forecast projects the following declines for the hardest-hit economies:
- Kuwait: 16.7 percent
- Iraq: 16 percent
- Qatar: 15.6 percent
- Bahrain: 11.3 percent
- Iran: 7.6 percent
- Saudi Arabia: 3.3 percent
Saudi Arabia has partly cushioned the hit to its energy sector by pushing up oil exports through the East-West pipeline, according to the outlook. It is still projected to contract by 3.3 percent.
Kyrgyzstan leads growth as global forecast edges up
Kyrgyzstan is forecast to post the strongest growth in the region, with output expected to expand 9 percent. Elsewhere, emerging and developing Asia is projected to grow 5.1 percent, Sub-Saharan Africa 4.5 percent, and Latin America and the Caribbean 2.3 percent.
Globally, the IMF now expects 3.1 percent growth, up from 3 percent in its previous outlook. The United States is forecast to grow 2.3 percent, China 4.5 percent and the eurozone 1.1 percent. The agency said activity had held up well this year but warned of several risks, including further escalation in conflicts, shifting expectations about artificial intelligence, renewed trade tensions and fiscal vulnerabilities.
On the upside, the IMF said stronger investment in AI and productivity gains from the technology, or a lasting easing of geopolitical and trade tensions, could boost growth.
