IMF Says Middle East, Central Asia Economies to Contract in 2026 Amid War

Iraq, Bahrain, Kuwait and Qatar Face Double-Digit GDP Contractions Amid Fallout from US and Israeli War Against Iran.

According to a report by the International Monetary Fund (IMF), the economy of the Middle East and Central Asia is set to shrink in 2026 amid the consequences of the US-Israel war against Iran, and countries such as Kuwait and Qatar will face double-digit contractions.

The region's gross domestic product (GDP) is expected to contract by 0.3 percent this year, a sharp drop from the 1.9 percent growth forecast in April, the International Monetary Fund said in its latest economic outlook on Tuesday.

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The end of the IMF's list was due to a downgraded outlook, citing prolonged disruption to shipping in the Strait of Hormuz, the conduit for a fifth of the world's peacetime oil supply.

Kuwait, Iraq, and Qatar are likely to experience the sharpest economic contractions, with their GDP projected to decline by 16.7 percent, 16 percent, and 15.6 percent, respectively.

Bahrain's GDP is projected to shrink by 11.3 percent, while Iran's economy is projected to shrink by 7.6 percent.

Saudi Arabia, which has partly compensated for the damage to its energy sector by boosting oil exports through the East-West pipeline, is estimated to record negative growth of 3.3 percent.

Kyrgyzstan is projected to have the strongest growth in the region, with a projected GDP growth of 9 percent.

The Middle East and Central Asia is the only region likely to experience negative growth in 2026.

Emerging and developing Asia's GDP is projected to grow by 5.1 percent, while the economies of sub-Saharan Africa and Latin America and the Caribbean are expected to grow by 4.5 percent and 2.3 percent, respectively.

The United States and China, the world's two largest economies, are forecast to register growth of 2.3 and 4.5 percent, respectively, while Eurozone GDP is estimated to grow by 1.1 percent.

The International Monetary Fund said it expects global gross domestic product to grow 3.1 percent, up from a previous outlook of 3 percent.

While economic activity has been steady this year, the global economy faces several risks, the Washington, D.C.-based institute said.

Further escalation of conflicts, reassessment of expectations around artificial intelligence (AI), new trade tensions and financial vulnerabilities could weaken growth, it said.

On the other hand, stronger momentum in AI investment and AI-driven productivity gains or continued easing of geopolitical and trade tensions could boost growth."