IMF's Latest Forecast for Saudi Arabia and Iran Paints a Grim Picture
Jakarta, CNBC Indonesia – The International Monetary Fund (IMF) has offered its assessment of Middle Eastern countries in its World Economic Outlook (WEO) Update for July 2026.
Whilst a number of Asian countries are still projected to grow strongly, the Middle East is among the groups most vulnerable in the IMF’s economic growth projections.
The main cause is a war that has disrupted energy routes and driven up energy commodity prices.
In the report, the IMF estimates that growth in the Middle East and Central Asia will fall sharply to 0.7% in 2026. In 2025, the region still grew by 3.7%.
However, in 2027 growth is expected to surge to 6.5%, assuming an improvement in energy conditions and global supply routes.
The Middle East and North Africa region is even projected to contract by 0.5% in 2026 before rebounding to 7.3% growth in 2027. This indicates significant pressure in 2026.
Egypt is one of the countries still projected to grow fairly strongly. The Egyptian economy is expected to grow 4.6% in 2026, higher than the 4.4% achieved in 2025. Egypt’s projection has also been revised up by 0.4 percentage points from the April 2026 report.
Saudi Arabia is still projected to grow positively, but at a sharply reduced pace. Its economy is expected to grow only 1.7% in 2026, far below the 4.6% recorded in 2025. By 2027, Saudi growth is expected to recover to 5.5%.
The IMF said Saudi Arabia is relatively less affected than several other commodity producers in the region because it has more diversified export routes. Even so, pressure from the war and energy disruptions has still led to a 1.4 percentage point downgrade to its 2026 projection.
Iran faces the heaviest pressure. The Iranian economy is projected to contract by 5.4% in 2026, after already declining 0.8% in 2025.
Interestingly, Iran’s 2026 projection has actually been revised up by 0.7 percentage points compared with the April report. The IMF explained this upgrade reflects better-than-expected oil exports in March and April, as well as the partial easing of export restrictions. Overall, however, the Iranian economy is still expected to experience a fairly deep contraction.
Energy Producers Hit Hardest
The July 2026 WEO report also highlights several energy-producing countries severely affected by disruptions to energy output and transport.
Iraq, Kuwait and Qatar are the commodity producers most affected by disruptions to energy production and transport. All three are projected to experience sharp contractions in 2026.
This contrasts with Saudi Arabia, which is relatively more insulated thanks to its more diversified export routes.
Pressure in the Middle East is also closely tied to the Strait of Hormuz. Under the baseline scenario of the July 2026 WEO, the reopening of the Strait of Hormuz is assumed to begin in mid-July 2026, with conditions expected to return to near pre-war levels by March 2027.
This assumption matters because the Strait of Hormuz is one of the world’s most strategic energy routes. Disruption to this route has an immediate knock-on effect on oil and gas supplies, commodity prices, inflation and the exchange rates of developing countries.
As a result, the Middle East’s projected growth in 2026 looks very weak, before surging in 2027. The large increase in 2027 does not mean the region is truly risk-free, but rather reflects a recovery as the severe energy disruptions of 2026 begin to subside.