Gulf Economies Face a Post‑War Slowdown, IMF Warns

A War That Stretches Beyond the Battlefield\nWhen the war drums echo across the Gulf, the ripple is felt even in the quiet corners of Riyadh. The ongoing clash between Saudi Arabia and Yemen’s Houthis has turned the region’s once steady march toward a jagged path, with every missile launch and every disrupted convoy adding a new scar to an already battered economy.\n\n## IMF’s Forecast: A Region in Retreat\nOn October 15, 2026, the International Monetary Fund released its latest projections during its annual meetings, painting a stark picture. The Middle East and Central Asia region is expected to contract 0.3 percent in 2026, while the broader Middle East, North Africa and Pakistan bloc faces a 1.3 percent contraction the same year. Saudi Arabia, the kingdom’s economic engine, is projected to shrink 3.3 percent in 2026 – a rare recession that could unsettle markets that have long leaned on its oil‑driven growth.\n\n## The Scarring Impact of War\nJihad Azour, the IMF’s regional chief, warned that the shock will have a scarring impact on various sectors and will disrupt a certain number of infrastructure, requiring additional spending to increase resilience. 'We will not go back to the pre‑war trajectory in the medium term because this shock will have a scarring impact on various sectors and also will disrupt a certain number of infrastructure, and will require additional spending in order to increase resilience,' he said.\n\n## Energy, Trade and Macro‑Stability\nThe same official added that the outlook hinges on how quickly energy production and trade normalize, and on countries’ ability to preserve macroeconomic stability. The war has already disrupted maritime energy traffic, a lifeline for oil exports, and the IMF notes that any delay in restoring this flow will deepen the downturn.\n\n## Policy Priorities in a Fragile Landscape\nBeyond the numbers, the IMF’s report urges policymakers to prioritize price stability and to rebuild fiscal buffers. By tightening monetary levers and shoring up public finances, governments can better weather future shocks and avoid the spiral of debt that has plagued the region in past crises.\n\n## Growth Trajectories in the Coming Years\nThe broader picture shows a gradual rebound: the Middle East, North Africa and Pakistan region is projected to grow 3.3 percent in 2025, jump to 6.6 percent in 2027, and the Caucasus and Central Asia region is expected to grow 5.2 percent in 2026 and 5 percent in 2027. Yet these gains will be uneven, with oil‑exporting economies like Saudi Arabia lagging behind.\n\n## A Cautious Outlook\nKristalina Georgieva, the IMF’s chief, warned that ongoing attacks targeting Saudi Arabia could affect people worldwide. As the conflict drags on, the region’s recovery will depend on a delicate balance of restoring trade routes, securing energy supplies, and maintaining macroeconomic discipline. For now, the Gulf’s path back to pre‑war growth remains a distant horizon, shadowed by the scars of a war that refuses to let go.