Middle East and Central Asia’s economy to shrink in 2026 amid war, IMF says

What the report says

The International Monetary Fund says the Middle East and Central Asia are headed for a rare economic contraction in 2026, with the region’s GDP expected to fall by 0.3 percent. That is a steep downgrade from the IMF’s April projection of 1.9 percent growth, according to Al Jazeera’s report published Oct. 13, 2026.

The outlook reflects the fallout from the US-Israel war on Iran and the continued disruption of shipping through the Strait of Hormuz, a critical route for global oil flows. Al Jazeera reported that Kuwait, Iraq and Qatar are among the hardest hit, with the IMF forecasting double-digit declines in output for those economies. Bahrain and Iran are also projected to contract sharply, while Saudi Arabia is expected to post negative growth despite some offset from increased oil exports through the East-West pipeline.

The IMF said the region is the only one it expects to shrink next year, while other major regions are still forecast to grow. It also flagged wider risks to the global economy, including conflict escalation, trade tensions and fiscal strains, while noting that stronger AI investment could provide some support.

The broader significance is that energy production, shipping security and conflict exposure are now weighing heavily on growth prospects across a major oil-producing region. As background, the IMF’s outlooks often influence investor expectations and government planning, especially in economies dependent on hydrocarbons and regional trade.