The World Bank has published its Economic Update for the Middle East, North Africa, Afghanistan and Pakistan (MENAAP), warning that the latest Middle East conflict is already taking a serious economic toll by disrupting markets, increasing financial volatility, and weakening the 2026 growth outlook. Excluding Iran, regional growth is projected to slow from 4.0% in 2025 to 1.8% in 2026, which is 2.4 percentage points below the World Bank Group’s January projections. The report links the deterioration to the closure of the Strait of Hormuz and the destruction of energy and public infrastructure, with the downgrade concentrated in Gulf Cooperation Council economies and Iraq. Growth in the GCC has been cut by 3.1 percentage points since January and is now projected to slow from 4.4% in 2025 to 1.3% in 2026. Downside risks include a prolonged conflict that could further lift energy and food prices, weaken trade, tourism and remittances, raise fiscal pressures, and increase displacement. Separately, the update examines industrial policy across MENAAP, noting widespread adoption in the past decade often via sovereign wealth funds and state-owned enterprises, mixed results, and the need for strong institutions and careful targeting.
World Bank 2026-04-08
World Bank downgrades MENAAP 2026 growth forecast to 1.8% amid Middle East conflict
The World Bank’s Economic Update for the Middle East, North Africa, Afghanistan and Pakistan warns the latest Middle East conflict is weakening the region’s 2026 growth outlook by disrupting markets, increasing financial volatility and damaging infrastructure. Excluding Iran, regional growth is now projected to slow from 4.0% in 2025 to 1.8% in 2026, with the downgrade concentrated in Gulf Cooperation Council economies and Iraq, where GCC growth is expected to fall from 4.4% to 1.3%. The update also highlights downside risks from a prolonged conflict and reviews the region’s mixed industrial policy efforts, often implemented through sovereign wealth funds and state-owned enterprises.