IMF Expects Strong Recovery for Oil-Exporting Economies Next Year

The International Monetary Fund (IMF) forecast today that economies of oil-exporting countries directly affected by energy and trade disruptions stemming from the war in the Middle East will experience a notable contraction in 2026 before recovering strongly in 2027 as production and trade gradually return to normal.

Jahad Azzuzi, Director of the IMF’s Middle East and Central Asia Department, said at a press conference during the IMF and World Bank Annual Meetings in Bangkok, Thailand, that rising oil prices provide some support to the fiscal and external positions of these countries, but output levels will remain below pre-war medium-term projections.

He clarified that the IMF expects the economies of the Middle East and North Africa and Pakistan to contract by 1.3 percent this year, following 3.3 percent growth in 2025, before achieving 6.6 percent growth in 2027.

He emphasized that these forecasts “mask significant divergence among countries in the region,” with economies directly affected by the conflict facing severe pressures, while others have shown greater resilience.

Azzuzi noted that oil-importing countries have maintained economic activity resilience, supported by remittances from workers abroad, tourism revenues, accommodative fiscal conditions, and government measures that mitigated the immediate impact of the shock, despite their diminishing capacity to provide further support.

He predicted moderate inflation increases in these economies this year, followed by a gradual decline in the subsequent period.

Regarding the Caucasus and Central Asia, Azzuzi stated that the region has weathered the shock relatively well, with inflation expected to continue declining. He explained that growth will slow to 5.2 percent in 2026 and then to 5 percent in 2027, compared to 6.2 percent in 2025.

He warned that the continuation of the war and renewed disruptions in energy production, shipping routes, and critical infrastructure pose the greatest risks to the region’s outlook, potentially weakening economic activity, raising inflation, and exacerbating fiscal and external pressures.

He clarified that pre-war accumulated surpluses, non-Gulf production, alternative transport routes, demand adaptation, and inventory drawdowns helped contain the energy shock, but stressed that these factors are limited as reserves decline and spare production capacity shrinks.

Azzuzi added that tightening global financial conditions could increase borrowing costs and pressure on currencies, particularly for countries reliant on external financing, while low-income and fragile economies remain more vulnerable to risks due to their dependence on food imports, limited resources, and declining development assistance.

He called for prioritizing price stability, fiscal sustainability, and rebuilding financial reserves by enhancing domestic revenues and improving expenditure efficiency, while directing temporary cash transfers to the most affected groups instead of broad-based subsidies.