IMF warns of severe contraction for regional economies due to war

The International Monetary Fund warned that the economy of the Middle East, North Africa, and Pakistan region will contract by 1.3% this year due to war, disruptions in energy production and shipping, and declining inventories and spare capacity.

The International Monetary Fund warned on Thursday of a severe contraction in the economies of the Middle East, North Africa, and Pakistan region by 1.3% this year, after growth of 3.3% last year. This warning comes against the backdrop of the war launched by the United States and Israel against Iran, and the subsequent closure of the Strait of Hormuz by Tehran, causing disruptions in energy and shipping markets. Jihad Azour, Director of the Middle East and Central Asia Department at the Fund, stated during a press conference on the sidelines of the IMF and World Bank annual meetings in Bangkok that the war has caused an uneven economic shock across the region's countries, with those directly affected by military operations facing severe pressures. Azour noted that forecasts depend primarily on the speed of return to normal energy production and trade, and countries' ability to maintain macroeconomic stability. He warned that declining inventories and reduced spare production capacity increase the likelihood of further price hikes, pointing out that pre-war spare production capacity, use of alternative routes, adjustments in demand levels, and significant inventory drawdowns helped mitigate initial repercussions.