IMF sees 1.3% contraction for Middle East, North Africa and Pakistan region in 2026, then 6.6% growth

The International Monetary Fund expects economic output in the region it calls MENAP (the Middle East, North Africa and Pakistan) to shrink by 1.3% in 2026 because of the US-Israeli war on Iran, before bouncing back with 6.6% growth in 2027. The forecast is in the IMF's regional economic outlook released in Dubai on Thursday, Reuters reported.

What the IMF said

• The war has hurt energy production, shipping, tourism, trade and confidence across the region.
• The damage is uneven. Oil exporters, whose production and shipping were disrupted directly, were hit hardest.
• Oil importers have been more resilient, helped by remittances and tourism, easier financial conditions and quick government steps to shield consumers from higher prices.
• Even after the 2027 rebound, output in most of these economies is expected to stay below the levels forecast before the war.
• The IMF's main case assumes the conflict eases in early 2027 and trade slowly returns to normal, but it calls the uncertainty "exceptionally high".

What it means for Pakistan

Pakistan is an oil importer, the group the IMF describes as holding up better, and remittances from workers in Saudi Arabia, the UAE and the UK are a large part of why. The other side of that is exposure: the IMF names further disruption to energy production and trade routes as the main risk, and Pakistan pays for that at the pump. PSO's ex-depot price in Karachi was Rs 379.31 a litre on 22 October; follow it on our petrol price page.

The Fund also warned that global financial conditions could tighten if investors cool on AI-driven productivity gains or interest rates rise on inflation and debt worries. For Pakistan that would make borrowing abroad dearer and could pressure the rupee. Check the dollar rate today and SBP's policy rate.

The IMF repeated its advice from last week's annual meetings: keep prices stable, keep budgets sustainable, protect central bank independence and push reforms that raise productivity and create jobs.

Other regions

The IMF expects the Caucasus and Central Asia to grow 5.2% in 2026 and 5% in 2027, slowing to what it calls a more sustainable pace.

The regional report groups Pakistan with the Middle East and North Africa; Pakistan's own country forecast is published separately in the IMF's World Economic Outlook and programme reviews.