Dubai, UAE – The International Monetary Fund (IMF) has lowered its 2026 global growth forecast to 3.1%, down from 3.3% in its January projections. It also raised its global inflation forecast to 4.4%. The IMF warns that the war in the Middle East has stalled the momentum the global economy had begun to recover at the start of the year. Furthermore, the IMF cautioned that prolonged instability could push global growth down to around 2%. It also cautioned that inflation could rise back above 6%.
The UAE is out of the recession zone
In the Gulf region, the UAE appears to be among the least affected economies so far. It is not among the countries expected to enter a recession this year. Moreover, the UAE’s profile at the International Monetary Fund projects growth of 5.0% in 2026 with inflation at 2.0%. This reflects the continued resilience of the UAE economy compared to other countries in the region. These countries are facing greater pressures from war and disruptions to energy and trade.
The Gulf is under uneven pressure
The picture painted by the IMF’s estimates for the Gulf region appears inconsistent. While the UAE and Oman remained outside the recession zone, Oman is projected to grow by 4.0% according to its IMF page. Saudi Arabia also saw its growth forecast lowered to 3.1%, according to direct coverage based on the IMF briefing. Previously, the January update on the Kingdom’s page indicated a projection of 4.5%. Therefore, this disparity demonstrates that the impact of the war is not uniform across Gulf economies. The effect varies depending on each country’s capacity to absorb energy, trade, and financial shocks.
Qatar, Kuwait and Bahrain are at the forefront of Gulf losses
In contrast, Qatar stands out as the Gulf economy most affected by the current war projections. It is expected to contract by 8.6% in 2026. Meanwhile, the same projections indicate a 0.6% contraction for Kuwait and a 0.5% contraction for Bahrain. Thus, the impact of the war on these economies has shifted from a mere slowdown in growth to an actual contraction. This is occurring amidst supply disruptions, rising energy costs, and increased pressure on trade and investment in the region.
Iran and Iraq are among the most affected in the region
Outside the Gulf Cooperation Council, the IMF estimates that Iran and Iraq are among the economies most severely impacted by the war. According to reports based on the IMF briefing, the Iranian economy is projected to contract by 6.1%. The Iraqi economy is projected to contract by 6.8% in 2026 as well. This reflects the magnitude of the blow to countries closest to the center of the conflict. It also shows how hard the economies most vulnerable to bottlenecks in trade, energy, and infrastructure have been hit.
Why did the UAE appear more cohesive?
An economic reading of the figures suggests that the UAE benefits from a more diversified growth base compared to other Gulf economies. The contribution of non-oil sectors, from tourism to financial services, real estate, and transportation, gives the economy greater resilience to oil and shipping shocks. Furthermore, high financial reserves and advanced logistics infrastructure help absorb some of the war’s impact, even as regional pressures persist. Conversely, the most vulnerable economies appear to be those most closely tied to direct supply risks. They are also the ones with greater exposure to energy and export disruptions. This interpretation aligns with the IMF’s warning that the current shock is “asymmetrical” across countries. Its impact depends on the strength of fiscal buffers and the ability to adapt to trade and energy disruptions.
Map of the countries mentioned in the Fund’s estimates
According to the IMF’s projections and the direct reports based on them, the UAE and Oman remained in growth territory. Saudi Arabia also remained in positive territory despite downward revisions to its forecasts. Meanwhile, Qatar, Kuwait, and Bahrain entered contraction territory, along with Iran and Iraq, which are suffering the most severe losses due to their proximity to the war’s epicenter. Thus, the key message conveyed by the IMF figures is that the Gulf region is not operating as a unified economic entity in this crisis. The UAE, in particular, appears to be in a relatively more resilient position than several of its neighbors.
