The International Monetary Fund (IMF) on Thursday projected a sharp fall in economic output across Pakistan, the Middle East and North Africa this year, blaming the US-Israeli-led war against Iran, before a strong recovery to 6.6 per cent growth in 2027. The Fund cautioned, however, that any further disruption to energy production could darken the outlook.
According to the IMF’s regional economic outlook, released in Dubai, the region’s output is expected to shrink by 1.3 per cent this year as the war hits energy production, shipping, tourism, trade and business confidence. Although growth is set to bounce back sharply next year, output in most of these economies will remain below the levels projected before the conflict began.
The Fund said the war’s impact had been heavy but uneven. Oil-exporting countries, directly exposed to disruptions in energy production and shipping routes, have suffered the most. Oil importers, by contrast, have held up better than expected.
The IMF’s baseline assumes the conflict will ease in early 2027 and that trade will return to normal gradually over the course of the year. Even so, it described the outlook as surrounded by “exceptionally high uncertainty.”
The biggest risks, the Fund said, come from further damage to energy facilities and trade routes, which could push energy prices higher. It also warned that global financial conditions could tighten if investors reassess expected productivity gains from artificial intelligence, or if interest rates climb further amid growing worries over inflation and public finances.
Oil-importing economies have shown resilience largely because domestic demand has been supported by remittances and tourism, relatively favourable financial conditions and quick policy action to shield consumers from rising commodity prices.
Elsewhere, the IMF said growth in the Caucasus and Central Asia was slowing to a more sustainable pace, forecasting output growth of 5.2 per cent in 2026 and 5 per cent in 2027.
Repeating the message it delivered at last week’s annual meetings, the Fund urged policymakers to keep price stability as their top priority, protect fiscal sustainability, preserve central bank independence and push ahead with structural reforms to raise productivity and create jobs.
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