International Monetary Fund: Protracted war and disruption are the biggest risks to Middle East economies

Protracted war in the Middle East and further disruptions to energy production, shipping lanes or critical infrastructure are the biggest threats to economies in the Middle East and Central Asia, the International Monetary Fund said on Thursday. The post IMF: Protracted war and disruption are biggest risks to Middle East economies appeared first on Safir Arjan.

According to Ambassador Arjan, Jihad Azar, director of the Middle East and Central Asia Department at the International Monetary Fund, told reporters that this war has imposed a very unbalanced economic shock on the entire region and that the countries that have been directly affected are facing severe pressures.

"The outlook ahead depends critically on the speed with which energy production and trade return to normal, as well as the ability of countries to maintain macroeconomic stability," Azour told a news conference on the sidelines of the annual meetings of the International Monetary Fund and the World Bank in Bangkok.

The existence of financial surpluses before the war, the use of alternative routes, the adjustment of demand and the significant withdrawal of existing reserves, have helped to contain the effects of the energy shock caused by the military aggression of the United States and the Zionist regime in Iran - and the disruption of transit through the Strait of Hormuz.

"These hitters bought time, but their resources are limited," he said. The level of reserves has decreased, the excess production capacity has decreased, and the occurrence of new disturbances can lead to much more severe price fluctuations.

Pointing to significant differences across the region, Azour said the International Financial Institution predicts that the Middle East, North Africa and Pakistan region will experience a sharp contraction of 1.3 percent in 2025 after growing at 3.3 percent, followed by a strong but uneven jump in 2027, when the growth rate is expected to reach 6.6 percent.

Oil-exporting countries directly affected by the war will experience a significant contraction in 2026, but as energy production normalizes, they will see a rapid jump in economic growth in 2027. However, production levels are expected to remain below medium-term pre-war forecasts. He added that the economies of oil importing countries in this region have shown good resilience and this situation is expected to continue.

The Caucasus region and Central Asia have also been able to withstand this shock relatively well, and it is expected that the process of reducing inflation from high levels will continue. After reaching 6.2% in 2025, the International Monetary Fund predicts that the region's growth rate will decrease to 5.2% in 2026 and then to 5% in 2027.

According to a Reuters report, Azour said policymakers should prioritize price stability, focus on rebuilding fiscal shields and increase their capacity to withstand potential future shocks.