The economy of the MENAAP region (the Middle East, North Africa, Afghanistan and Pakistan) is expected to shrink by 2.1 percent in 2026, following growth of 3.3 percent last year. This is according to a new report from the World Bank.
The conflict that began in February and the closure of the Strait of Hormuz are hitting the Gulf region’s oil exporters particularly hard. The GCC countries’ economies are expected to shrink by an average of 4.3 percent, while lower export volumes are putting pressure on government revenues. Tourism, aviation and logistics are also being negatively affected, and inflationary pressures are increasing, partly due to higher food prices.
Oil-importing countries are faring better and are expected to grow by 4.3 percent, compared with 3.9 percent in 2025. If the conflict eases before year-end, the World Bank expects growth in the region, excluding Iran, to recover to 7.8 percent in 2027, primarily driven by increased oil and gas production and exports.
In the longer term, the World Bank points to AI as a potential growth engine. Between 13 and 20 percent of jobs in the region are estimated to be able to receive significant productivity gains through AI, while less than 10 percent are estimated to be at risk of automation in the short term.
