Shafaq News- Bangkok

A prolonged war in the Middle East and further disruptions to energy production, shipping routes, and critical infrastructure pose the biggest risks to economies across the Middle East and Central Asia, the International Monetary Fund said on Thursday.

"The outlook depends critically on how quickly energy production and trade normalize, and on countries' ability to preserve macroeconomic stability," Jihad Azour, the IMF's director for the Middle East and Central Asia, told a news conference during the IMF and World Bank annual meetings in Bangkok.

He noted that pre-war fiscal surpluses, alternative shipping routes, adjustments in demand, and heavy withdrawals from inventories had helped cushion the impact of the energy shock triggered by US-Israeli attacks on Iran and Tehran's subsequent closure of the Strait of Hormuz.

"These buffers bought time, but they are finite. Inventories are lower, spare capacity is tighter," he said, warning that further disruptions could trigger much larger price adjustments.

The IMF expects the economy of the Middle East, North Africa, and Pakistan to contract by 1.3% in 2026, following growth of 3.3% in 2025, before rebounding sharply to 6.6% in 2027, Azour said. He cautioned, however, that the recovery would vary significantly across the region.

In the Caucasus and Central Asia, growth is forecast to slow to 5.2% in 2026 and 5% in 2027, down from 6.2% in 2025. Azour noted that the region had weathered the shock relatively well, while inflation is expected to continue easing from elevated levels.