IMF warns Gulf economies face lasting damage as 2026 growth forecasts cut

Gulf economies will not return to pre-war growth soon, IMF warns The International Monetary Fund (IMF) expects Middle Eastern economies to bounce back, but not in the medium term, the organisation's regional chief said on Thursday. "We will not go back to the pre-war trajectory in the medium term because this shock will have a scarring impact on various sectors and also will disrupt a certain number of infrastructure, and will require additional spending in order to increase resilience," IMF regional director Jihad Azour told reporters. The warning comes as officials and experts huddled in Bangkok this week to discuss headwinds facing the global economy, including stubbornly high energy costs. The IMF on Tuesday released projections showing that the Middle East and Central Asia region -- directly exposed to the Iran war -- is expected to contract 0.3 percent in 2026. Saudi Arabia is among the worst affected, with its economy projected to shrink 3.3 percent, a rare recession for the kingdom long been buffered by robust energy exports. On Wednesday, IMF chief Kristalina Georgieva warned that ongoing attacks targeting Saudi Arabia could affect people "everywhere". Report by AFP

The International Monetary Fund expects energy-rich Middle Eastern economies to bounce back, but not in the medium term, the organisation’s regional chief said on Thursday, as fighting continued between Saudi Arabia and Yemen’s Houthis. The statement comes as the IMF projects a widespread contraction in Gulf economies following months of war that began in Iran and has now spread to Saudi Arabia and Yemen, with maritime energy traffic still impacted. “We will not go back to the pre-war trajectory in the medium term because this shock will have a scarring impact on various sectors and also will disrupt a certain number of infrastructure, and will require additional spending in order to increase resilience,” IMF regional director Jihad Azour told reporters. The warning comes as officials and experts huddled in Bangkok this week to discuss headwinds facing the global economy, including stubbornly high energy costs and questions over the sustainability of the artificial intelligence boom. The IMF on Tuesday released projections showing that the Middle East and Central Asia region — directly exposed to the Iran war — is expected to contract 0.3 per cent in 2026. Saudi Arabia is among the worst affected, with its economy projected to shrink 3.3pc. The projection points to a rare recession for the Gulf kingdom, which has long been buffered by robust energy exports. On Wednesday, IMF chief Kristalina Georgieva warned that ongoing attacks targeting Saudi Arabia could affect people “everywhere”. A violent battle between a Saudi-led coalition and Yemen’s Houthis has sharply escalated in recent days, with fatal missile strikes hitting airports and energy facilities, as well as the headquarters of the kingdom’s state oil giant Aramco.

The Middle East and North Africa is now expected to be the only region to shrink this year. In April, the IMF forecast Saudi Arabia and the UAE would grow.

IMF slashes Middle East growth outlook due to war disruptions The International Monetary Fund (IMF) has sharply cut growth forecasts for the Middle East and Central Asia in 2026 amid the ongoing conflict in the region. Saudi Arabia's GDP is expected to contract by 3.3 percent this year, the IMF said in its latest World Economic Outlook report, adding that the kingdom was among the least affected in the region.