The IMF sees uneven post-war recoveries as it revises MENA growth forecasts downward

The US-Israel war on Iran is cutting MENA growth off at the knees, with the IMF now projecting regional GDP to grow at just 1.1% this year, according to its Regional Economic Outlook (pdf). That’s a 2.6 percentage point downgrade from pre-war forecasts, driven by disruptions to oil flows, shipping, and trade reverberating through both energy exporters and importers.

Growth across the GCC is projected to slow dramatically to 2.0% this year, down from a pre-war forecast of 4.3%, wide gaps between countries oil and gas production and export capacity take hits from the war. Qatar faces the steepest contraction (-8.6%), with its growth outlook revised down 14.7 percentage points, while Iraq’s GDP is projected to contract 6.8% (revised down 10.4 percentage points). Bahrain and Kuwait are also seen ending 2026 with negative growth (albeit at far more moderate levels), while Oman, Saudi Arabia, and the UAE are all projected to hold onto growth of more than 3% despite the revisions.

Next year will be better: The IMF expects GCC growth to stage a comeback in 2027 to 4.8%, although that figure is contingent on the resumption of oil production and the reopening of the Strait of Hormuz.

Outside the GCC, oil-importing economies face a different but still-significant set of pressures. Egypt, Jordan, Morocco, and Tunisia are being squeezed by higher commodity import costs, rising sovereign borrowing costs, and potential declines in remittances from workers in the GCC. Sovereign bond yields in Egypt have climbed, while the EGP lost as much as 15% of its value against the greenback (although it has recently pared some of those losses).

Energy subsidies among oil-importers are straining public finances, creating budgetary pressures at a moment when fiscal space across the region is already considerably tighter than it was before the pandemic. Morocco, whose sovereign yields have risen to around 6% since the conflict began, faces particular exposure through its tourism and transport sectors, which are among those most vulnerable to the regional volatility.

Things are more complicated for Lebanon: After recording 4.0% growth last year in what was its first meaningful recovery in years, the country’s outlook for 2026 is now deeply uncertain. The IMF did not publish growth projections for Lebanon in the report. Lebanon is now reportedly in talks with the lender for a rapid financing package between USD 800 mn and USD 1 bn for budget support and humanitarian needs, Bloomberg reports.