The Middle East region’s economic growth is expected to slow to 2.1% in 2024, down from an earlier estimate of 2.7%, according to the International Monetary Fund's (IMF) latest regional economic outlook (pdf). Next year’s growth forecast was also trimmed to 4%, driven by insufficient foreign direct investment amid regional wars and high debt levels in middle-income economies.

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The IMF attributed the slowdown to regional conflicts, particularly the escalated tensions in Gaza, Lebanon, and Sudan, impacting stability and potentially creating “lasting economic losses,” according to the report — a projection echoed by the IMF’s MENA and Central Asia director, Jihad Azour, in an interview with Bloomberg.

There’s some flexibility on structural reform, but not much: States around the conflict zone, including Egypt, Jordan, and Iraq, “need to be protective to preserve their macroeconomic stability,” Azour said. However, “crucial structural reforms could face rising social discontent and political resistance, hindering policy execution and constraining growth.”

Oil cuts are also to blame: Oil production cuts imposed by OPEC+ are also squeezing revenues for oil-reliant MENA economies, including Saudi Arabia, the UAE, and Iraq. The oil management alliance recently delayed a planned supply increase to December, citing weak demand from China and increased production elsewhere.

But the non-oil sector remains a bright spot: “Growth of the non-oil sector in the Gulf Cooperation Council has been resilient and has been driving the growth for the last couple of years,” Azour said.

Less gloomy on the global front: The IMF revised downwards its forecast for global growth in 2025 to 3.2%, a 0.1 percentage point downward revision from its July estimate, on the back of escalating geopolitical tensions and trade protectionism.

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