IMF: Middle East to See Economic Contractions in 2026

Several Middle Eastern economies are expected to contract in 2026 in the wake of the war in Iran, which broke out in late February, according to the International Monetary Fund’s latest World Economic Outlook, released Thursday. The IMF has revised its global growth forecast down to 3.1 percent. However, this headline figure masks regional differences, with the Middle East and Central Asia now projected to slow to 1.9 percent in 2026, marking a drop of 3 percentage points from the January outlook.

The IMF warns that commodity exporters directly affected by the conflict face steep downgrades due to reduced production and exports. The extent of the impact will depend on the degree of the damage to energy and transport infrastructure, as well as reliance on the Strait of Hormuz and access to alternative export routes. As a result, contractions are expected to be most severe in Iran, Iraq and Qatar. Growth across the region is expected to rebound in 2027, assuming that energy production and transport routes normalize in the coming months.

As the following chart shows, Iran’s 2026 growth forecast has been cut by 7.2 percentage points since January to -6.1 percent. In Saudi Arabia, the outlook has been lowered by 1.4 percentage points to 3.1 percent.