Middle East economies show resilience but risks still linger - Salaam
As-salamu alaykum - The IMF says economies across the Middle East and North Africa have shown a surprising ability to hold steady, even though they remain exposed to several headwinds. The lender points out that calm in parts of Lebanon and Syria could help the wider region’s recovery prospects.
The report notes that, despite a string of geopolitical shocks over the past two years, overall output in the region is expected to rise gradually. Countries in the MENA area, along with Afghanistan, Pakistan, the Caucasus and Central Asia, mostly escaped major harm from recent global trade tensions.
According to the IMF preview, the Gaza-Israel war and other tensions had only limited short-term effects. It added that a few places are making progress toward peace, which can lay the foundation for rebuilding - Lebanon’s ceasefire with Israel gives some hope for reconstruction, and Syria’s political shifts have opened new economic possibilities.
The fund projects growth of about 3.3% for the MENA region this year and 3.7% in 2026, slightly higher than its July estimates. It expects growth to pick up faster in 2025 than earlier thought, helped by stronger oil output from exporters, ongoing structural reforms in some emerging and middle-income economies, and better agricultural performance.
Oil exporters in the region and Pakistan have benefitted from higher production after OPEC+ decisions, while importers gained from lower energy costs, healthy remittances and a rebound in tourism. These factors, together with relatively subdued global demand and rising supply outside OPEC+, have kept oil prices fairly low.
Financial conditions have generally supported the recovery too: sovereign spreads narrowed for some countries, exchange rates adjusted, and several governments accessed international markets successfully. Inflation patterns vary across countries, but food and energy prices have fallen in many places and are expected to stay muted or decline slowly into 2026.
Saudi Arabia is a key driver of the upward revision, with growth now forecast around 4% this year and next, helped by changes in voluntary oil cuts. The UAE is also expected to post strong growth in 2025–26.
Still, the IMF cautions that risks remain. The biggest threats are weaker global demand, tighter international financial conditions, and higher-than-expected inflation that could push up borrowing costs - hurting countries with large financing needs or banking sectors with heavy government debt exposure. Renewed regional tensions and more frequent climate shocks also threaten to disrupt economies and stability.
On the positive side, a quicker end to conflicts and faster implementation of long-delayed structural reforms could give growth a meaningful lift.
May Allah grant stability and prosperity to the region and guide leaders toward wise policies that benefit people. Salam.
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