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IMF lowers its 2025 Middle East and North Africa growth forecast by 2.6% due to global risks

The International Monetary Fund announced on Thursday that it expects the Middle East and North Africa economy to grow only 2.6% by 2025, as uncertainty stemming a trade war in the world and lower oil prices are weighing on this region.

The new projection was a significant downgrade from the October projection, which predicted 4% growth. This comes at a time when the region is grappling with geopolitical tensions and a softer external market.

In an interview, Jihad Azour said, "Uncertainty can impact real economy, consumption and investment... All these elements have led to a softerening of projections."

The direct impact of tariffs is limited due to the limited integration of trade between the U.S. and the region.

In its latest Regional Economic Outlook released in Dubai, the IMF pointed out a gradual improvement in oil production as well as protracted regional conflict and delayed structural reforms in Egypt.

The report stated that "the ongoing conflicts in MENA have left profound economic scars and deep humanitarian costs," adding that it has had a severe impact on the region's oil-importing economies.

In 2025, the MENA non oil importers will see a real GDP increase of 3.4%, compared to an earlier forecast that predicted 3.6%.

DIVERGING OUTLOOKS

The growth of non-Gulf Cooperation Council (non-GCC) oil exporters will slow down by one percentage point - a sharply downward revision – before staging a modest rebound in 2026.

The GCC economy is projected to grow, but at a slower rate than in October. This is due to the extended OPEC+ production cuts that will continue through April. There will also be a gradual phase out by 2026 and a weaker non-oil sector.

Azour stated that "with all these changes and obstacles, it is important to also seek new trade partners," referring to GCC. The GCC comprises Bahrain, Kuwait Oman, Qatar Saudi Arabia, and United Arab Emirates.

IMF predicts GCC GDP growth of 3.2% for 2025, down from the 4.2% it predicted in October.

GCC countries are stepping up their efforts to diversify economies. Initiatives like Saudi Arabia’s Vision 2030, and the UAE’s push in tourism, logistics, and manufacturing aim to reduce reliance on hydrocarbons.

Azour stated that "trade diversification, structural reforms accelerated, and productivity improvement are all elements which will help non-oil sectors to maintain a high level of growth." (Reporting by Manya Saini in Dubai Editing by Shri Navaratnam)

(source: Reuters)