Economic expansion in the Middle East, North Africa, and Pakistan is outpacing earlier predictions in 2025, driven by steady domestic consumption, increased oil production, and consistent inflows from remittances and tourism. During the International Monetary Fund’s 2025 Annual Meeting, Jihad Azour, head of the IMF’s Middle East and Central Asia Department, shared updated forecasts highlighting resilience despite ongoing global volatility. Although external risks persist, the region has demonstrated stronger-than-expected adaptability to international disruptions.
“Economic output has remained stable, with inflation either moderate or declining across most areas,” Azour noted. “Some of the global momentum stems from short-term dynamics—such as businesses accelerating activity ahead of tariff changes, supply chain adjustments, and major investments in artificial intelligence. As these influences wane, global demand could weaken, affecting our region through trade, financial flows, and commodity markets.” He added that growth in the MENAP region is now projected at 3.2% for 2025, up from 2.1% in 2024 and higher than the April estimate. Oil-exporting nations have benefited from increased production following the quicker-than-expected rollback of OPEC+ output restrictions, while oil-importing countries and Pakistan have gained from lower energy prices, robust remittance inflows, and a thriving tourism sector—all of which have supported internal demand.
Looking ahead, regional growth is expected to gain further traction, with MENAP projected to expand by 3.7% in 2026. Meanwhile, the Caucasus and Central Asia (CCA) region is forecast to grow by 4.5% in 2025, moderating to about 4% in the medium term, underpinned by solid consumer spending, credit growth, and consistent hydrocarbon exports. However, inflation trends vary: while most MENAP economies see easing price pressures, several CCA nations face rising inflation due to strong domestic demand and imported cost increases, even as exchange rates adjust smoothly and sovereign risk spreads narrow.
Azour cautioned that downside risks remain substantial. Recent global shocks and persistent uncertainty could dampen demand, trigger a broader economic slowdown, or tighten financial conditions worldwide. Elevated inflation and fiscal concerns in advanced economies might push up borrowing costs—particularly for nations in the region with high financing requirements. Additionally, geopolitical instability and climate-related events continue to pose threats to economic stability. On the positive side, faster progress toward peace and structural reforms could unlock more robust and inclusive growth.
The current economic momentum offers a critical opportunity for policymakers to rebuild fiscal and external buffers, especially in countries where reserves and fiscal flexibility are limited. To sustain this progress, Azour emphasized three key priorities: strengthening fiscal frameworks for long-term sustainability, reinforcing central bank credibility to manage inflation expectations, and accelerating structural reforms to diversify economies, empower private enterprise, and attract job-creating investment. In conflict-affected areas, urgent focus should be placed on macroeconomic stabilization, institutional rebuilding, and securing international support to enable recovery.
Beyond immediate stabilization, lasting prosperity will depend on deeper transformations—improved governance, greater regional integration, and more inclusive participation. These objectives are expected to shape national policy agendas and guide continued collaboration with global partners, including the IMF.
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IMF / Regional Economic Outlook for the Middle East and Central Asia Press Briefing
Growth across the Middle East and North Africa (MENA) region and Pakistan is exceeding expectations this year, lifted by resilient domestic demand, stronger oil output and steady remittance and tourism flows. The assessment came during the International Monetary Fund (IMF) 2025 Annual Meeting, where Jihad Azour, Director of the Middle East and Central Asia Department, outlined the latest projections. The outlook, while still clouded by global uncertainty, reflects a region that has weathered external shocks better than anticipated. n n“Output growth has held steady and inflation remained moderate or eased in most regions. Some of the global economy strength reflects temporary factors, such as firm, frontloading activity ahead of the tariff increases and adjusting inventories and supply chain, as well as significant investment in new AI technologies. As these factors fade, global demand may soften, which could affect our regions through trade, finance and commodity channels. Economic activity in the MENA region and Pakistan has been stronger than expected. We now project growth of 3.2% in 2025, up from 2.1% in 2024, and higher than our April forecast. Oil exporters have benefited from higher oil output following the faster unwinding of OPEC+ cuts. Oil importers and Pakistan have gained from low energy prices, strong remittances and a vibrant tourism sector, all supporting domestic demand,” said Azour. n nRegional momentum is expected to build further, with MENAP growth projected to reach 3.7% in 2026, while activity in the Caucasus and Central Asia (CCA) is seen expanding 4.5% this year, before easing to around 4% over the medium term, supported by strong consumption, credit expansion and steady hydrocarbon exports. However, inflation trajectories diverge: easing in most MENAP economies but accelerating in several CCA countries, fueled by robust demand and imported price pressures, even as exchange rates adjust smoothly and sovereign spreads narrow. n n“In MENA and Pakistan, growth should continue to strengthen, supported by reforms and resilient domestic demand. In the CCA, growth will moderate to a more sustainable pace, while inflation gradually declines. However, downside risks remain significant. Recent shocks and still-elevated global uncertainty could undermine demand and induce global economic slowdown or tightening global financial conditions. Persistent inflation and concerns about fiscal sustainability in advanced economy could raise borrowing costs, especially for countries in our regions with large financing needs. The region remains exposed to geopolitical tensions and climate-related shocks, which could disrupt activity. On the upside, faster progress toward peace and reforms could yield a stronger and more inclusive growth,” suggested Azour n nThe outlook underscores the importance of acting while conditions remain relatively stable. Amid heightened uncertainty, the current momentum offers policymakers a narrow window to rebuild fiscal and external buffers, especially where reserves and fiscal space are limited. The next phase should center on translating this stability into concrete policy measures. n n“To sustain growth and strength and resilience, countries should: first, enhance fiscal frameworks to ensure long-term sustainability; second, reinforce monetary policy credibility to anchor inflation expectations; and three, accelerate structural reforms to diversify economies, empower the private sector and attract investment that creates jobs. In conflict-affected countries, priority must include rapid macroeconomic stabilization, rebuilding institutions and securing external support to enable recovery,” advised Azour. n nBeyond immediate stabilization, lasting prosperity will depend on broader structural shifts – stronger governance, deeper regional integration, and more inclusive participation. These priorities are expected to guide domestic policy agendas and shape continued engagement and support from international partners, including the Fund.