According to a report carried by The Express Tribune, the International Monetary Fund forecasts that economic output in the Middle East, North Africa and Pakistan region will contract by 1.3% this year, largely because of the US-Israeli-led war against Iran and its impact on energy production, shipping, tourism, trade and confidence.
Rebound in 2027, but below pre-war path
The IMF expects a sharp recovery in 2027, with growth of 6.6%, though output in these economies would generally stay below pre-war projections. Its baseline assumes the conflict abates in early 2027 and trade gradually normalises during the year.
Oil importers more resilient
The war's impact was substantial but uneven, the Fund said. Oil exporters were hit harder by disruptions to energy production and shipping, while oil importers proved more resilient, helped by domestic demand supported by remittances and tourism, favourable financial conditions and prompt policy steps that shielded consumers from higher commodity prices.
The main risk
The IMF said the outlook is clouded by "exceptionally high uncertainty", with the main risk being further disruption to energy production and trade routes that could push energy prices higher. External financial conditions could also tighten if investors reassess AI-driven productivity gains and interest rates rise further on inflation and fiscal worries.
The Fund urged policymakers to prioritise price stability, fiscal sustainability, central bank independence and structural reforms to raise productivity and create jobs. It forecast growth of 5.2% in 2026 and 5% in 2027 for the Caucasus and Central Asia.