The International Monetary Fund (IMF) has announced in its recent report that the economies of the Middle East and Central Asia, considered as a single region, will face a decline this year. This decline is due to the ongoing war that began in February and has disrupted economic activities. However, the Fund has predicted that this region will improve next year, provided that the Strait of Hormuz is reopened by March 2027.
Projected Decline in Economic Growth
According to the IMF's forecasts, the economies of the Middle East will decline by 0.3 percent in 2026, a significant drop from the 1.9 percent growth projected in April. The institution has pointed to long-term disruptions in transportation in the Strait of Hormuz. This strait, in times of peace, is one of the main oil transportation routes, accounting for about one-fifth of the global oil supply.
Read more: Negative Growth Forecast for Gulf Economies in 2026
Impacts on Different Countries
Kuwait, Iraq, and Qatar will particularly face severe declines in GDP, projected at 16.7 percent, 16 percent, and 15.6 percent, respectively. Bahrain is also expected to experience an 11.3 percent decline. The economy of the United Arab Emirates is expected to decline by 3.9 percent this year but is projected to achieve a growth of 7.7 percent in 2027.
Saudi Arabia is also expected to see a 3.3 percent decline, although it has partially offset some damage to its energy sector by increasing oil exports through the East-West pipeline. In 2027, the country's GDP is expected to improve by 7.9 percent.
Outlook for Economic Recovery
The economic recovery of the Gulf region depends on various factors, including the reopening of the Strait of Hormuz and stability in geopolitical conditions. If these conditions are met, the countries in the region can return to their growth and development paths and leverage their potential capacities. This recovery could also lead to increased foreign investments and improved living conditions for people in these countries.
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