IMF sees Middle East shrinking as Asia, Africa grow

The International Monetary Fund released its regional economic outlooks on Thursday, October 15, at its annual meetings in Bangkok. The forecasts show growth spreading unevenly. Asia-Pacific growth is expected to slow to 4.8% in 2026, sub-Saharan Africa should grow 4.5%, and the Middle East, North Africa and Pakistan region is projected to shrink 1.3% under the weight of the Iran war.bloomberg.com+1

Asia slows, but AI cushions the fall

The Asia-Pacific region grew 5% last year. Its 2026 forecast of 4.8% is up from the IMF's April estimate of 4.4%, and growth is expected to ease to 4.4% in 2027. Demand linked to artificial intelligence drove the upgrade. Growth in the region's advanced economies is expected to pick up to 3.2% from 2.5%. Emerging Asia is forecast to slow to 5.1% from 5.6% because of higher energy prices.thestar.com.my+1

The IMF listed several risks: the energy shock from the Iran war, a possible correction in the AI boom, and spillover from rising bond yields in the US, UK, euro zone and Japan. It also told central banks to be ready to raise interest rates if inflation persists. It cut its forecast for low-income economies to 3.7%.businesstoday.in+1

Africa edges up as inflation rises

The IMF expects sub-Saharan Africa to grow 4.5% this year and next, matching its 2025 pace. That is 0.2 percentage point above the April forecast. Even so, Reuters reported that median inflation is now projected to rise from 3.4% in 2025 to 4.3% in 2026 and 5.0% in 2027. The fund said most countries "may" need to tighten monetary policy. Prospects also vary within the region. The IMF raised Nigeria's forecast to 4.2% on higher oil revenue, while South Africa is expected to lag well behind the regional average.bloomberg.com+2

War drives a Middle East contraction

The Middle East, North Africa and Pakistan region grew 3.3% in 2025. The IMF expects it to contract 1.3% this year before rebounding 6.6% in 2027. Jihad Azour, the fund's director for the Middle East and Central Asia, said the rebound will be "strong, but uneven". Bahrain, Iraq, Kuwait and Qatar face double-digit contractions in 2026, and Saudi Arabia is forecast to shrink 3.3%. Growth in the Caucasus and Central Asia is expected to slow to 5.2% from 6.2%.forbesmiddleeast.com+1

Azour said pre-war surpluses and inventory drawdowns had cushioned the shock from Iran's closure of the Strait of Hormuz, but warned that "these buffers bought time, but they are finite… renewed disruption could generate much larger price adjustments".finance.yahoo.com