IMF sees GCC economies shrinking 4.8% in 2026, rebounding 9.1%

Summary

• The IMF projects GCC output contracting 4.8% in 2026 before a 9.1% rebound in 2027.
• Oil exporters hit directly by the shock absorbed the deepest downgrades, the Fund's regional director said.
• The figures set the baseline for 2027 Gulf budgets and borrowing plans.

The latest

Gulf Cooperation Council economies will contract 4.8% this year before expanding 9.1% in 2027, according to International Monetary Fund projections presented at the Fund's annual meetings. Jihad Azour, director of the IMF's Middle East and Central Asia Department, said oil exporters directly exposed to the shock took the sharpest downgrades. He described the disruption as the largest oil shock in at least five or six decades.

Details

• The headline numbers: The IMF puts GCC growth at minus 4.8% in 2026 and 9.1% in 2027, according to the transcript of the Middle East and Central Asia Department press briefing held on 15/10/2026 during the Fund's annual meetings. The swing between the two years exceeds 13 percentage points.
• The wider region: For the Middle East, North Africa, Afghanistan and Pakistan grouping, the Fund projects growth falling from 3.3% in 2025 to minus 1.3% in 2026, then recovering to 6.6% in 2027. The MENAP contraction is far shallower than the Gulf's, reflecting the concentration of the shock among hydrocarbon exporters.
• Most exposed: Azour placed Kuwait among the states most heavily affected, alongside Qatar, Iraq and Iran, citing their limited ability to route exports around the Strait of Hormuz and limited fiscal space to cushion the hit. That combination, he said, explains why their projections were cut hardest.
• Better buffered: Saudi Arabia and the United Arab Emirates were grouped separately as economies holding alternative export channels and reserves that allow them to absorb the shock. Azour did not publish country-level growth figures for either state in the briefing.
• The outlier: Oman sits outside the Strait of Hormuz and is the least affected Gulf economy in the Fund's assessment, according to Azour's grouping. Its geography spares it the chokepoint exposure that drove the downgrades for Qatar, Iraq and Iran.
• Scale of the shock: Azour characterised the disruption as the biggest oil shock in at least five or six decades. He said reserves held outside the region, the capacity to redirect supplies and market adaptation together limited the pass-through to crude prices, softening what would otherwise have been a sharper global effect.
• The main risk: The Fund identified a longer-running conflict as the most important downside risk to its projections. Any further disruption to energy production, shipping routes or critical infrastructure would weaken activity across Gulf exporters and add to inflation pressures, Azour said.
• Not specified: The briefing did not attach a date or a set of conditions to the assumed normalisation underpinning the 9.1% rebound in 2027, nor did it break the GCC aggregate into individual country forecasts.

Background

The Strait of Hormuz is the export route for most Gulf crude and liquefied natural gas. The Fund's three-way grouping of Gulf states turns on which producers can move barrels around that chokepoint and which cannot, and on how much fiscal room each government has to spend through a downturn.

Between the lines

The size of the projected 2027 rebound is itself a statement about the shock's nature: a 9.1% snapback implies the Fund treats the contraction as a supply and routing disruption rather than a structural break in demand. That reading carries a condition the Fund named explicitly — a prolonged conflict is the main risk — meaning the recovery figure rests on the disruption easing rather than deepening.

What's next

Watch Gulf 2027 budget drafts and sovereign borrowing plans built on the Fund's figures, further disruption to shipping or energy infrastructure that would test the rebound assumption, and the IMF's next World Economic Outlook revision.

Source: International Monetary Fund