The International Monetary Fund (IMF) has revised its 2025 economic growth forecast for the Middle East and North Africa (MENA) region downward to 2.6%, a significant decrease from the 4% projected in October 2024. This adjustment reflects escalating global uncertainties, including trade wars, declining oil prices, and ongoing regional geopolitical tensions.

Jihad Azour, Director of the IMF's Middle East and Central Asia Department, highlighted weakened consumption, investment, and external demand as contributing factors to the revised forecast. He noted that "uncertainty could impact the real economy, consumption, investment... all these elements led to a softening of our projections."

Country-Specific Projections

• Oil-Importing Nations: Expected to grow by 3.4%, slightly below the prior 3.6% forecast.

• Non-Gulf Oil Exporters: Anticipate a sharper slowdown, with a one percentage-point drop in growth projected for 2025.

• Gulf Cooperation Council (GCC) Economies: Projected to grow at 3%, down from 4.2%. Despite the downgrade, these economies show resilience due to ongoing diversification efforts, such as Saudi Arabia’s Vision 2030 and the UAE’s investments in non-oil sectors.

Challenges Highlighted

The IMF report notes sluggish oil production recovery, persistent conflicts, and delayed reforms, particularly in Egypt, as key challenges. Oil production cuts across the MENA region have impacted growth, with voluntary production cuts by some OPEC+ countries leading to a decline in hydrocarbon growth.

Recommendations for Sustained Growth

The IMF suggests that trade diversification, structural reform acceleration, and productivity improvement are vital for sustaining non-oil sector growth despite global and regional challenges.

Background on Jihad Azour

Jihad Azour has been serving as the Director of the Middle East and Central Asia Department at the IMF since 2017. Prior to this role, he held various positions in the Lebanese government, including Minister of Finance from 2005 to 2008. Azour has also worked in the private sector and academia, contributing to his extensive experience in economic policy and development.

Social and Economic Implications

The downward revision of the growth forecast has significant implications for the MENA region. Slower economic growth can exacerbate unemployment rates, particularly among the youth, and may lead to increased social unrest. Countries heavily reliant on oil revenues may face fiscal deficits, affecting public services and infrastructure projects. The IMF's emphasis on structural reforms and economic diversification highlights the need for MENA countries to reduce their dependence on oil and develop resilient economies capable of withstanding global economic fluctuations.

Historical Context

This is not the first time the IMF has adjusted its growth forecasts for the MENA region. In October 2024, the IMF projected a 4% growth for 2025, contingent on the phasing out of oil production cuts and the easing of other headwinds such as conflicts. However, persistent challenges have necessitated a downward revision.

The IMF's revised forecast underscores the pressing need for MENA countries to address both global and regional challenges through comprehensive reforms and economic diversification strategies to achieve sustainable growth.