Energy disruptions due to the Iran war will weigh heavily on Gulf oil and gas exporters' economies, while the Middle East's oil importers like Egypt and Jordan face shocks from higher commodity prices and possible falls in income from remittances from Gulf-based workers, the International Monetary Fund (IMF) said.
Overall, the Middle
East and North Africa region is expected to record a much slower
expansion this year with real GDP growth now forecast at 1.1 per cent,
which is 2.8 percentage points lower than the pre-war projection, before seeing
a recovery in 2027, the IMF's latest Regional Outlook Report showed.
"It's not only a
story of oil and gas, it's also the impact that this war has on all the
other products that are produced in the region and where the region
has a strategic position," Jihad Azour, the IMF's director for the Middle
East and Central Asia, told Reuters, including exports of fertilisers
and several chemical and other specialised products which make it a globally
strategic economic corridor.
"In addition to
that, the conflict affected the non-oil sector, where the countries in the GCC
have a strategic global position, especially in terms of airlines and
logistics."
Among regional oil
importers, some are highly dependent on Gulf economies for both energy imports
and financial flows, leaving them exposed if the war intensifies or becomes
protracted, the IMF said.
RECOVERY PROSPECTS
VARY
Growth in the
six-member Gulf Cooperation Council is projected to slow significantly to 2 per
cent in 2026 from 4.3 per cent forecast in October, with big
variations between the economies, the IMF said, before accelerating sharply to
4.8 per cent next year.
"If you have a
recovery in oil production, and also if you have a full opening of the Strait
of Hormuz, this means that countries will ramp up their production very
quickly. And...the level of (oil) prices, that are expected to remain elevated
compared to the pre-2026 levels, will allow countries - on the oil side - to
regain some of the ground that they are losing currently because of the
crisis," Azour said.
Saudi Arabia, the
world's top oil exporter and a G20 economy, was expected to be one of the
lesser-affected Gulf economies due to its capacity to redirect some exports
through alternative routes to the Strait of Hormuz as well as due to its relatively
more resilient non-oil industrial production.
"Therefore, the
impact on the economy will be short-lived and limited," Azour said, but
contingent on the duration of the conflict.
The IMF now expects
Saudi growth to slow in 2026 to 3.1 per cent, 0.9 percentage points lower than
its October forecast.
Azour also said the
IMF remains committed to providing support to
countries across the region. Since early 2020, the IMF has approved
nearly $46 billion in financing across the region, and deepened engagement with
several countries including Egypt and Pakistan.
The Fund said
medium-term priorities included diversifying trade routes, strengthening
critical infrastructure, and deepening regional cooperation on food, water, and
energy.
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