DUBAI: The Middle East and North Africa region is expected to have ‌sharply slower growth this year as oil-exporting countries grapple with the fallout from the Iran war, the International Monetary Fund said on Tuesday. The region's ​real GDP growth forecast was slashed to 1.1% in the IMF's latest World Economic Outlook, 2.8 percentage points lower than its January projection.

Growth is ​expected to ​rebound to 4.8% in 2027. The IMF said, however, that its estimates for 2027 assumed energy production and transportation in the region are normalised over the next few months. It noted that this assumption may need to ⁠be revised if the conflict drags on. "MENA countries are facing unprecedented challenges, exceptional uncertainty in their outlook," IMF Deputy Managing Director Bo Li said during a panel discussion in Washington.

"Even if we see production and exports normalized by the middle of this year, the MENA economies, their growth, their growth outlook, are already severely impacted."

Tehran's attacks on Gulf neighbours, in response to U.S.-Israeli strikes ​that began in ‌late February, have ⁠damaged major energy facilities and disrupted ⁠shipping through the Strait of Hormuz, which would normally handle about 20% of global oil and liquefied natural gas flows.

"For those countries ​most directly affected, their output will remain below their pre-war trends for the near term ‌and also for the medium term," Bo added.

The war has also created inflationary ⁠pressures and clouded the global economic outlook. U.S.-Iran talks to resolve the conflict broke down on the weekend and the U.S. military has begun a blockade of Iran ports, though efforts to maintain dialogue continue.

 

SAUDI ARABIA FARING BETTER THAN OTHERS

The IMF said it revised GDP projections for countries in the region much lower due to diminished production and exports. The degree of revision depended on "damage suffered in energy and transportation infrastructure as well as the dependence on the Strait of Hormuz and availability of alternative export routes," it added.

Saudi Arabia, the world's top oil exporter and the Arab world's biggest economy, is now expected to see growth of 3.1% in 2026, 1.4 percentage points lower than a January estimate. The kingdom, however, is ‌expected to be less severely affected by the war than its Gulf neighbours.

Iran's ⁠economy is forecast to shrink 6.1% in its fiscal year that began on March ​21, before rebounding to 3.2% growth the year after. Before the war, it was expected to expand 1.1% this fiscal year.

Bahrain, Iraq, Kuwait and Qatar are also now expected to see their economies contract this year, the IMF report said. GDP growth revisions were milder ​for regional oil ‌and gas importers. Growth in Egypt, for example, is projected to slow to 4.2% in 2026 ⁠from an earlier estimate of 4.7%, and is ​forecast to recover to 4.8% in 2027. (Reporting by Reuters staff; Editing by Edwina Gibbs and Andrea Ricci )