International warning: War and unrest threaten the Middle East economy

Washington - Ofoq News - The International Monetary Fund warned on Thursday that the continuation of the war in the Middle East, and the accompanying disruptions in energy production, shipping movement, and vital infrastructure, constitute the greatest threat to the economies of the Middle East and Central Asia.

The Fund's Director of the Middle East and Central Asia Department, Jihad Azour, said that the war caused an economic shock of varying impact on the countries of the region, with the directly affected countries being exposed to severe pressure.

Azour added, during a press conference on the sidelines of the annual meetings of the International Monetary Fund and the World Bank in Bangkok, that the prospects for the regional economy depend to a large extent on the speed of restoring energy production and trade to their normal levels, and the ability of governments to maintain macroeconomic stability.

Pre-war surpluses, alternative supply routes, declining demand, and withdrawals from stocks contributed to limiting the repercussions of the attacks led by the United States and Israel on Iran, and the subsequent closure of the Strait of Hormuz by Tehran.

But Azour warned of the limitations of these resources, explaining that inventories have declined, and spare production capacity has decreased, making renewed unrest a factor that could push prices to greater rises.

The International Monetary Fund expected the economies of the Middle East, North Africa, and Pakistan to contract by 1.3% in 2026, after recording growth of 3.3% in 2025, with the region returning to growth in 2027, at an expected rate of 6.6%.

Azour pointed out a great disparity in economic prospects between countries in the region, especially between oil-exporting countries directly affected by the war and oil-importing countries.

The most affected oil-exporting countries are expected to face a sharp contraction during 2026, followed by a strong recovery the following year as energy production returns to normal levels. However, the economic output of these countries may remain below the levels that were expected in the medium term before the outbreak of war.

On the other hand, the economies of oil-importing countries have shown resilience, and the Fund expects this resilience to continue despite the regional challenges.

In the Caucasus and Central Asia, economies have relatively succeeded in containing the repercussions of the shock, with inflation expected to continue to decline from its high levels.

The IMF expected economic growth in the region to slow to 5.2% in 2026, then to 5% in 2027, compared to growth of 6.2% in 2025.

Azour called on policy makers to give priority to price stability, work to rebuild financial reserves, and enhance the ability of the region’s economies to confront future shocks.