WORLD - The International Monetary Fund (IMF) expects global economic growth to reach 3.1% in 2026, warning that geopolitical tensions, disrupted energy supplies and renewed trade pressures are weighing on the world economy.
In its October 2026 World Economic Outlook, titled “Resilience Under Strain, Urgent Choices,” the IMF said the global outlook remained uneven, with economic performance increasingly shaped by the effects of conflict and investment in artificial intelligence (AI).
The fund projected global growth to remain at 3.1% in 2026, while advanced economies are expected to grow by 2.1% and emerging market and developing economies by 3.7%.
The report identified further disruptions to energy production and shipping, rising public debt and renewed trade tensions as major risks to the outlook. However, stronger-than-expected AI investment, faster productivity gains and improved trade arrangements could support economic activity.
Middle East and Central Asia Face Contraction
The IMF expects the economies of the Middle East and Central Asia to contract by 0.3% in 2026, marking a sharp downgrade from its April projection of 1.9% growth.
The region is forecast to rebound to 6.3% growth in 2027, assuming energy production, shipping and trade gradually normalize following disruptions linked to the regional war.
The outlook reflects the impact of the prolonged closure of the Strait of Hormuz, a critical route for global energy shipments. The IMF's baseline scenario assumes the waterway will reopen in March 2027, with conditions broadly returning to prewar levels by October 2027.
The report projects particularly severe contractions in several energy-producing economies in 2026. Kuwait's economy is expected to shrink by 16.7%, Iraq's by 16%, Qatar's by 15.6% and Bahrain's by 11.3%. Iran is forecast to contract by 7.6%, while Saudi Arabia's economy is projected to decline by 3.3%.
These economies are expected to recover in 2027 as energy production, exports and logistics normalize. However, the IMF cautioned that the projected rebound depends on the course of the conflict and the pace of the restoration of economic activity.
Lebanon and the Wider MENA Region
Lebanon faces additional economic risks from regional instability, particularly through disruptions to trade, tourism, investment and other economic activity.
The IMF's October World Economic Outlook does not provide a specific growth forecast for Lebanon in its published country tables. Its regional assessment nevertheless highlights the broader pressures facing economies exposed to higher energy costs, disrupted transport routes and weaker economic confidence.
For Lebanon, these risks compound existing economic vulnerabilities. Higher energy and import costs could place further pressure on households and businesses, while reduced tourism and investment could constrain economic activity.
Across the broader Middle East and North Africa, the impact is uneven. Oil-exporting countries are particularly exposed to interruptions in production and shipping, while some oil-importing economies have shown greater resilience through remittances, tourism and policy responses.
The IMF's regional projections point to a difficult year for economies directly affected by the conflict, even as stronger growth is anticipated in 2027. The projected recovery remains dependent on improved security conditions and the normalization of trade and energy flows.
IMF Urges Fiscal Discipline and Policy Stability
The fund called on governments to rebuild fiscal buffers amid elevated public debt, rising sovereign borrowing costs and competing spending demands.
It recommended credible fiscal adjustment plans combining stronger revenue collection with more efficient public spending, supported by institutional improvements.
Any government assistance designed to cushion households from higher food and energy prices should be temporary and targeted, the IMF said, without undermining longer-term fiscal sustainability.
The report also identified AI-related investment as a potential source of stronger productivity and growth, although the global outlook remains vulnerable to geopolitical and economic shocks.
