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

Published On 13 Oct 202613 Oct 2026.

Key points

• The Middle East and Central Asia is the only region that is projected to experience negative expansion in 2026.
• While Iran's economy is projected to shrink by 7.6 percent, bahrain's GDP is forecast to contract by 11.3 percent.
• The IMF remarked it anticipated global GDP to grow 3.1 percent, up from 3 percent in its previous outlook.
• Kyrgyzstan is projected to have the strongest expansion in the region, with GDP forecast to expand 9 percent.
• The Washington, DC-based institution remarked while economic activity had proved resilient this year, the global economy faced multiple risks.

Notably, the economy of the Middle East and Central Asia is due to shrink in 2026 against the backdrop of the fallout of the US-Israel war on Iran, with countries such as Kuwait and Qatar facing double-digit contractions, according to the International Monetary Fund (IMF).

Notably, the region's gross domestic product (GDP) is forecast to contract by 0.3 percent this year, a sharp downgrade from the 1.9 percent expansion projected in April, the IMF remarked in its latest economic outlook on Tuesday.

Notably, the IMF cited the prolonged disruption to shipping in the Strait of Hormuz, a conduit for one-fifth of global oil supplies in peacetime, for the downgraded outlook.

Kuwait, Iraq and Qatar are forecast to have the most severe economic contractions, with their GDPs projected to shrink by 16.7 percent, 16 percent and 15.6 percent, respectively.

Saudi Arabia, which has partially offset the hit to its energy sector by boosting oil exports through the East-West pipeline, is projected to record negative expansion of 3.3 percent.

Meanwhile, the Middle East and Central Asia is the only region that is projected to experience negative expansion in 2026.

While the economies of Sub-Saharan Africa and Latin America and the Caribbean are projected to expand 4.5 percent and 2.3 percent, respectively, emerging and developing Asia's GDP is forecast to grow 5.1 percent.

While the eurozone's GDP is estimated to grow 1.1 percent, the United States and China, the world's two largest economies, are forecast to register expansion of 2.3 percent and 4.5 percent, respectively.

For context, the IMF remarked it anticipated global GDP to grow 3.1 percent, up from 3 percent in its previous outlook.

For context, the Washington, DC-based institution remarked while economic activity had proved resilient this year, the global economy faced multiple risks.

"Further escalation in conflicts, a reassessment of expectations surrounding artificial intelligence (AI), renewed trade tensions, and fiscal vulnerabilities could weaken growth, " it remarked.

"On the upside, stronger momentum in AI investment and productivity gains from AI or a sustained easing of geopolitical and trade tensions could strengthen growth."

For now, middle East and Central Asia's economy to shrink in 2026 amid war, remains the part of the story worth watching, and further updates are likely as more details are confirmed.