Resilience or luck? At the recent IMF-World Bank Annual Meetings in Bangkok, this question was on every policymaker’s mind. There were good reasons for relief: despite a succession of shocks, the global economy had held up better than many feared. So too has the Middle East and North Africa.
When hostilities erupted in the Gulf at the end of February, provoking the largest oil and energy shock in history, many feared the region’s economies would be overwhelmed: Shipping lanes would close, energy prices would soar, and the more vulnerable economies would struggle to stay afloat. Eight months later, those worst fears have not materialized. Activity has slowed sharply in some places, but it has not collapsed. In many economies, it has continued to expand.
Economies have adjusted, while existing buffers and policy responses have helped absorb the shock. But pressures are building, particularly in import-dependent, low-income, and fragile states.
The IMF’s latest Regional Economic Outlook for the Middle East and Central Asia projects output in the Middle East and North Africa to contract by 1.3% in 2026, 2.7 percentage points below our April forecast. Yet that headline figure conceals considerable differences in a region that spans more than 20 countries.
Several Gulf economies face deep contractions this year as disrupted energy production and trade take their toll. A sharp rebound is expected in 2027, assuming the conflict abates and trade gradually normalizes. But it will not erase the losses: Gulf output is projected to remain below pre-conflict expectations in the medium term.
Major oil importers like Egypt, Jordan, and Morocco have shown surprising resilience, with growth expected to exceed 4% this year. Remittances, tourism, investment, and favorable financial conditions have helped sustain growth, while policy measures have cushioned households from higher food and energy costs. But pressures are building, with inflation expected to decline more slowly than forecast in the spring.
The risks will grow the longer conflict-related disruptions persist. Low inventories and tight spare capacity could magnify further energy price spikes. Prolonged uncertainty could weigh on investment, tourism, and trade. The poorest economies are especially vulnerable: food accounts for a large share of household spending, and declining aid leaves less room to cushion another shock. A global market correction, whether prompted by a reassessment of AI-driven gains or interest rates remaining higher for longer, would add to the strain, particularly where financing needs are already large.
For MENA policymakers, the consensus in Bangkok was clear: In times of turbulence, preserving macroeconomic stability remains the immediate policy priority. As one finance minister put it, “the policy frameworks and buffers built in good times decide how much room we have in the bad times.”
Policies should focus on containing inflation, preserving fiscal sustainability, and protecting the vulnerable. With food, energy, and transport costs rising, central banks need to guard against renewed inflation. Meanwhile, governments should protect vulnerable households while keeping debt manageable and pursuing the investment and reforms needed for future growth. That means mobilizing revenue, prioritizing spending, and ensuring support is targeted and temporary. Countries with stronger buffers have more room to support recovery and reconstruction. Those with less will face tougher choices to avoid adding to their debt.
But managing this shock is only part of the task. Regional economies need to prepare for the next crisis. Diversifying trade and production would reduce reliance on narrow export baskets and vulnerable transport routes. Better infrastructure and deeper regional integration would cut rerouting costs and strengthen supply chains. Investment in renewable energy would limit exposure to volatile fuel markets.
At the same time, the region needs new engines of growth. Digital technologies, including AI, offer opportunities as Gulf economies invest in data centers and digital infrastructure. Turning that investment into broader prosperity will require better education and skills, stronger governance and competition, and deeper links to global markets.
The experience of the past eight months suggests that resilience has been earned, through adjustment, stronger policy frameworks, and buffers built before the conflict. But resilience is a process. If the Middle East conflict persists and buffers are steadily depleted, today’s delayed effects could become tomorrow’s larger adjustment.
Governments have an opportunity to act. In an era of recurring shocks, the economies that prepare before the next disruption will be best placed not just to endure it, but to emerge stronger.
Jihad Azour is the IMF’s Director for the Middle East and Central Asia Department
Source: www.semafor.com
