IMF projects MENA and Pakistan output to contract in 2026 on war-related disruptions

Traders Union
All News
Economic Data
IMF MENA Pakistan 2026 outlook

Highlights

IMF projects MENA and Pakistan economies to contract by 1.3% in 2026 due to war-related disruptions, with oil exporters hit hardest.
Assuming conflict eases in early 2027, IMF forecasts economic output rebound of 6.6% in 2027, though recovery remains below pre-war expectations.
IMF warns further energy and trade disruptions may raise energy prices and deepen strain, while tighter financial conditions could complicate financing for vulnerable economies.

Regional outlook points to war-driven downturn

As reported by BusinessWorld Online, citing the International Monetary Fund, the region’s economy is expected to contract by 1.3% in 2026, with the damage falling unevenly across oil exporters and importers. The IMF says oil-exporting economies are taking a heavier hit from disruptions to energy production and shipping, while oil importers are showing greater resilience.

The regional outlook, released on Thursday in Dubai, says the fund’s baseline scenario assumes the conflict eases in early 2027 and trade gradually normalizes over the year. Under that scenario, economic output rebounds by 6.6% in 2027, although activity across the affected economies generally remains below levels expected before the war.

The IMF says the outlook is clouded by exceptionally high uncertainty. It warns that further disruptions to energy production and trade routes could lift energy prices and deepen the economic strain across the region.

Energy risks and policy pressures remain in focus

Beyond the direct effects of the conflict, the IMF says tighter external financial conditions could add pressure if investors reassess artificial intelligence-driven productivity gains and interest rates rise further amid inflation and fiscal concerns. That combination could complicate financing conditions for economies already dealing with weaker confidence and trade disruption.

The fund says oil importers have so far held up better, supported by domestic demand, remittances, tourism flows, favorable financial conditions and policy measures aimed at shielding consumers from higher commodity prices. In the Caucasus and Central Asia, growth is moderating toward what the IMF describes as a more sustainable pace, with output forecast to rise 5.2% in 2026 and 5% in 2027.

The IMF reiterates its call for policymakers to maintain price stability, preserve fiscal sustainability and protect central bank independence. It also urges structural reforms to raise productivity and create jobs as governments prepare for a prolonged period of geopolitical and market volatility.

In our earlier article on the IMF’s warning about war-driven disruptions in the Middle East and Central Asia, we explained that renewed shocks to energy production, shipping routes and trade flows could deepen a region-wide downturn in 2026 before an uneven rebound in 2027. The piece also highlighted the IMF’s view that buffers are limited, leaving oil exporters more exposed, and urged policymakers to focus on price stability and rebuilding fiscal resilience to withstand further volatility.

This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.