IMF forecasts 1.3% contraction in Pakistan, 6.6% growth in 2027

The International Monetary Fund (IMF) has predicted a significant economic contraction of 1.3% for the Middle East, North Africa, and Pakistan this year, primarily due to the ongoing US-Israeli-led war against Iran. This conflict has severely impacted energy production, shipping, tourism, trade, and overall confidence in the region. While the IMF forecasts a rebound to 6.6% growth by 2027, economic output is expected to remain below pre-war projections. The war's effects have been uneven, with oil-exporting economies suffering more from disruptions, while oil importers have shown greater resilience, supported by remittances and tourism. The IMF's baseline assumes the conflict will abate in early 2027, but warns of 'exceptionally high uncertainty' and risks from further energy production disruptions and tightening external financial conditions. Policymakers are urged to focus on price stability, fiscal sustainability, central bank independence, and structural reforms.