Oil-exporting economies directly affected by energy and trade disruptions stemming from the war in the Middle East are expected to contract significantly in 2026 before recovering strongly in 2027 as production and trade gradually return to normal, the International Monetary Fund (IMF) has forecast.
Jihad Azour, director of the IMF’s Middle East and Central Asia Department, said at a press conference during the annual meetings of the IMF and the World Bank in Bangkok that higher oil prices were providing some support to the fiscal and external positions of affected countries. However, he cautioned that output would remain below the medium-term levels projected before the war.
The Fund expects the economies of the Middle East, North Africa and Pakistan to contract by 1.3 percent in 2026, following growth of 3.3 percent in 2025, before expanding by 6.6 percent in 2027. Azour stressed that the regional projections concealed significant differences between individual economies. Countries directly affected by the conflict were facing severe economic pressure, while others had demonstrated greater resilience.
Oil-importing economies had maintained relatively resilient economic activity, supported by remittances from workers abroad, tourism revenues, favourable financial conditions and government measures that helped cushion the immediate impact of the shock. However, their ability to provide additional support had diminished.
Central Asia faces slower growth
The IMF official expected inflation in these economies to rise moderately during 2026 before gradually declining in the subsequent period. Turning to the Caucasus and Central Asia, Azour said the region had weathered the economic shock relatively well, with inflation expected to continue declining. Growth in the region was projected to slow to 5.2 percent in 2026 and 5 percent in 2027, compared with 6.2 percent in 2025.
He warned that a prolonged war or renewed disruptions to energy production, shipping routes and critical infrastructure represented the main risks to the region’s economic outlook. Such developments could weaken economic activity, fuel inflation and intensify fiscal and external pressures.
Azour said pre-war surpluses, production from countries outside the Gulf, alternative transportation routes, adjustments in demand and withdrawals from existing stockpiles had helped contain the energy shock. However, he cautioned that these safeguards were limited, particularly as stockpiles declined and spare production capacity narrowed.
IMF calls for targeted support and stronger reserves
Tighter global financial conditions could also raise borrowing costs and put pressure on currencies, especially in countries dependent on external financing. Low-income and fragile economies remained particularly vulnerable because of their reliance on food imports, limited financial resources and declining development assistance.
Azour called on governments to prioritise price stability, maintain fiscal sustainability and rebuild financial reserves by strengthening domestic revenue collection and improving public spending efficiency. He recommended temporary cash assistance for the groups most affected by the economic shock rather than broad-based subsidies, which can place greater pressure on public finances.
He also highlighted the importance of central bank independence, diversifying trade and deepening regional integration to strengthen economies’ ability to withstand future shocks and sustain growth.