DUBAI – The International Monetary Fund (IMF) has warned that energy-rich economies in the Middle East are unlikely to return to their pre-war growth paths in the medium term, as escalating hostilities involving Saudi Arabia and Yemen’s Houthi movement continue to disrupt economic activity and energy shipments.
IMF Middle East and Central Asia Department Director Jihad Azour said the conflict had inflicted lasting damage on several sectors and affected critical infrastructure, meaning regional economies would require additional investment to strengthen their resilience.
“We will not go back to the pre-war trajectory in the medium term,” Azour told reporters, warning that the economic consequences would extend beyond the immediate period of fighting.
His remarks came as policymakers and economists gathered in Bangkok to assess growing risks to the global economy, including persistently high energy prices and concerns about whether the artificial intelligence boom can be sustained.
The IMF’s latest economic projections, released on Tuesday, forecast a 0.3 per cent contraction in the Middle East and Central Asia region in 2026. The region has been particularly exposed to the economic fallout from the war involving Iran and its wider regional consequences.
Saudi Arabia is expected to face an even sharper downturn, with the IMF projecting a 3.3 per cent contraction in its economy this year. Such a decline would mark a significant setback for the kingdom, whose economy has traditionally benefited from substantial energy exports.
The disruptions to maritime transport and energy infrastructure have added to the pressure on regional economies, while uncertainty surrounding the conflict has complicated economic planning.
IMF Managing Director Kristalina Georgieva had warned earlier that continued attacks targeting Saudi Arabia could have repercussions far beyond the region, affecting people and economies worldwide.
The security situation has deteriorated amid intensified fighting between a Saudi-led coalition and Yemen’s Houthi movement. Recent missile attacks have reportedly caused fatalities and targeted airports, energy installations and the headquarters of Saudi state oil company Aramco.
The IMF’s assessment highlights the possibility that the economic damage will persist even after hostilities subside. Repairing infrastructure, restoring trade flows and rebuilding investor confidence could require substantial time and public spending.
For Gulf economies seeking to maintain growth and diversify beyond hydrocarbons, the prolonged instability presents an additional challenge to investment, trade and long-term development plans.