The International Monetary Fund (IMF) says the economies of the Middle East and Central Asia will contract in 2026 due to the impact of the war between the US-Israel and Iran, with countries such as Kuwait and Qatar facing double-digit declines.
In its latest economic outlook report published on Tuesday, the IMF forecast that the region's gross domestic product (GDP) will shrink 0.3% this year, a sharp downgrade from the 1.9% growth projected in April.
The IMF attributed the revision to prolonged disruption to shipping through the Strait of Hormuz, the maritime route that normally carries one-fifth of global oil supplies.
Kuwait, Iraq and Qatar are expected to suffer the steepest economic declines, with GDP falling 16.7%, 16% and 15.6% respectively. Bahrain's GDP is projected to fall 11.3%, while Iran's economy is forecast to contract 7.6%.
Saudi Arabia, which has partly offset damage to its energy sector by increasing oil exports through the East-West pipeline, is estimated to post negative growth of 3.3%.
Kyrgyzstan is forecast to record the region's strongest growth, with GDP rising 9%. The Middle East and Central Asia is the only region expected to post negative growth in 2026.
Elsewhere, sub-Saharan Africa's GDP is forecast to grow 4.5%, while Latin America and the Caribbean are expected to expand 2.3%. The world's two largest economies, the United States and China, are projected to grow 2.3% and 4.5% respectively, while eurozone GDP is estimated to rise 1.1%.
The IMF said global GDP growth is expected to reach 3.1%, higher than the 3% in its previous forecast. The Washington-based institution said this year's economic activity has shown resilience, but the global economy still faces multiple risks.
The IMF warned: "Further escalation of conflict, a reassessment of expectations around artificial intelligence (AI), renewed trade tensions and fiscal vulnerabilities could weaken growth."
On the positive side, the IMF said stronger investment in AI and productivity gains from AI, or a lasting easing of geopolitical and trade tensions, could bolster growth.
