Iraq, Bahrain, Kuwait and Qatar forecast to face GDP declines amid fallout from US-Israel-Iran tensions.
13 Oct 2026
The Middle East and Central Asia’s economy is projected to contract in 2026 due to escalating geopolitical tensions between the US, Israel, and Iran, with Kuwait and Qatar facing the most severe downturns, according to the International Monetary Fund (IMF).
The region’s gross domestic product (GDP) is now forecast to decline by 0.3 percent, a significant downgrade from the 1.9 percent growth projected in April, the IMF announced in its latest economic outlook.
The IMF attributed the downward revision to prolonged disruptions in maritime shipping lanes, particularly through the Strait of Hormuz, a critical artery for one-fifth of global oil trade during normal conditions.
Kuwait, Iraq, and Qatar are anticipated to experience the deepest contractions, with GDP expected to drop 16.7 percent, 16 percent, and 15.6 percent respectively. Bahrain’s economy is projected to shrink 11.3 percent, while Iran faces a 7.6 percent decline.
Saudi Arabia, which has partially offset energy sector pressures by increasing crude exports via its East-West pipeline, is forecast to record a -3.3 percent growth rate.
Conversely, Kyrgyzstan is positioned as the region’s strongest performer, with its economy expected to expand 9 percent in 2026.
The Middle East and Central Asia stands as the only global region projected to enter negative growth next year.
In contrast, emerging and developing Asia is expected to grow at 5.1 percent, with Sub-Saharan Africa and Latin America and the Caribbean posting 4.5 percent and 2.3 percent expansions respectively.
Global economic growth is projected to reach 3.1 percent, a modest increase from the prior 3 percent estimate, despite facing headwinds.
The IMF highlighted potential vulnerabilities, noting that further regional conflicts, uncertainties around artificial intelligence integration, renewed protectionist policies, and fiscal imbalances could dampen global growth trajectories. However, robust AI-driven productivity gains or de-escalation of geopolitical tensions present upside opportunities for economic recovery.
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