Prolonged war, renewed disruptions pose biggest risk to Middle East region, IMF says

IMF: Prolonged War, Energy Disruptions Threaten Middle East Economies

IMF Warns of Economic Risks Amid Middle East Conflict

By Andrea Shalal

BANGKOK, Oct 15 (Reuters) - Prolonged war in the Middle East and further disruptions to energy production, shipping routes or critical infrastructure pose the biggest risk to economies in the Middle East and Central Asia, the International Monetary Fund said on Thursday.

Uneven Economic Impact Across the Region

Jihad Azour, the IMF's director for the Middle East and Central Asia, told reporters the war was imposing a highly uneven economic shock to the broader region, with directly affected states under severe pressure.

Role of Energy Production and Trade

"The outlook depends critically on how quickly energy production and trade normalize, and on countries’ ability to preserve macroeconomic stability," Azour said at a news conference during the annual meetings of the IMF and World Bank in Bangkok.

Buffer Measures and Their Limitations

Pre-war surpluses, alternative routes, demand adjustments and substantial inventory drawdowns had helped contain the impact of the energy shock caused by the US-Israeli-led attacks on Iran and Tehran's subsequent closure of the Strait of Hormuz.

"These buffers bought time, but they are finite. Inventories are lower, spare capacity is tighter, and renewed disruption could generate much larger price adjustments," he said.

IMF Economic Forecasts for the Region

The global lender is forecasting a deep contraction of 1.3% in the Middle East, North Africa and Pakistan region after growth of 3.3% in 2025, followed by a strong, but uneven rebound in 2027, when growth is expected to hit 6.6%, Azour said, noting substantial differences across the region.

Oil-Exporting vs Oil-Importing Countries

Oil-exporting countries directly affected by the war would see a significant contraction in 2026 and a sharp rebound in growth in 2027 as energy production normalizes, but output was expected to remain below pre-war medium-term projections.

The economies of oil-importing countries in the region had been resilient and were expected to remain so, he said.

Outlook for the Caucasus and Central Asia

The Caucasus and Central Asia region had weathered the shock relatively well and inflation was expected to continue declining from elevated levels. The IMF is projecting growth to slow to 5.2% in 2026 and then 5% in 2027, from growth of 6.2% in 2025.

Policy Recommendations

Azour said policymakers should prioritize price stability, focus on rebuilding fiscal buffers and expand their capacity to withstand future shocks. 

(Reporting by Andrea Shalal; Editing by John Mair)