IMF warns Gulf economies will not return to pre-war growth soon
Why This Matters
Key context: <p>The International Monetary Fund expects energy-rich Middle Eastern economies to bounce back, but not in the medium term, the organisation’s regional chief said on Thursday, as <a href="https://www.dawn.com/live/iran-israel-war">fighting</a> continued between Saudi Arabia and Yemen’s Houthis.</p> <p>The statement comes as the IMF projects a widespread contraction in Gulf economies following months of war that began in Iran and has now spread to Saudi Arabia and Yemen, with maritime energy traffic still impacted.</p> <p>“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,” IMF regional director Jihad Azour told reporters.</p> <p>The warning comes as officials and experts huddled in Bangkok this week to discuss headwinds facing the global economy, including stubbornly high energy costs and questions over the sustainability of the artificial intelligence boom.</p> <p>The IMF on Tuesday released projections showing that the Middle East and Central Asia region — directly exposed to the Iran war — is expected to contract 0.3 per cent in 2026.</p> <p>Saudi Arabia is among the worst affected, with its economy projected to shrink 3.3pc.</p> <p>The projection points to a rare recession for the Gulf kingdom, which has long been buffered by robust energy exports.</p> <p>On Wednesday, IMF chief Kristalina Georgieva warned that ongoing attacks targeting Saudi Arabia could affect people “everywhere”.</p> <p>A violent battle between a Saudi-led coalition and Yemen’s Houthis has sharply escalated in recent days, with fatal missile strikes hitting airports and energy facilities, as well as the headquarters of the kingdom’s state oil giant <a href="https://www.dawn.com/news/2037136">Aramco</a>.</p> This development from dawn.com highlights ongoing changes in the sector.
The International Monetary Fund expects energy-rich Middle Eastern economies to bounce back, but not in the medium term, the organisation’s regional chief said on Thursday, as fighting continued between Saudi Arabia and Yemen’s Houthis. The statement comes as the IMF projects a widespread contraction in Gulf economies following months of war that began in Iran and has now spread to Saudi Arabia and Yemen, with maritime energy traffic still impacted. “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,” IMF regional director Jihad Azour told reporters. The warning comes as officials and experts huddled in Bangkok this week to discuss headwinds facing the global economy, including stubbornly high energy costs and questions over the sustainability of the artificial intelligence boom. The IMF on Tuesday released projections showing that the Middle East and Central Asia region — directly exposed to the Iran war — is expected to contract 0.3 per cent in 2026. Saudi Arabia is among the worst affected, with its economy projected to shrink 3.3pc. The projection points to a rare recession for the Gulf kingdom, which has long been buffered by robust energy exports. On Wednesday, IMF chief Kristalina Georgieva warned that ongoing attacks targeting Saudi Arabia could affect people “everywhere”. A violent battle between a Saudi-led coalition and Yemen’s Houthis has sharply escalated in recent days, with fatal missile strikes hitting airports and energy facilities, as well as the headquarters of the kingdom’s state oil giant Aramco.
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