MENA Economy Set for 8.5% Rebound in 2027 After Deep 2026 Slump: BMI

RIYADH: The Middle East and North Africa region is projected to return to growth in 2027, expanding 8.5 percent, after a contraction this year, according to a forecast from BMI, a Fitch Solutions company. 

BMI expects the MENA economy to contract by 3.3 percent in 2026, a sharper decline than the 0.9 percent contraction it forecast in June. 

The 2026 contraction would mark the deepest MENA-wide downturn in four decades, exceeding the 2.5 percent decline recorded during the 2020 pandemic, BMI said. 

The downgrade reflects a longer disruption to traffic through the Strait of Hormuz, delaying the recovery in hydrocarbon production, trade, investment and services. 

The forecast follows a broader downgrade from the International Monetary Fund in July, which projected growth across the Middle East and Central Asia would slow to 0.7 percent in 2026 before rebounding to 6.5 percent in 2027, down from April estimates of 1.9 percent and 4.6 percent, respectively. 

Mariette Ras Khanna, associate director at BMI, told Arab News that the Gulf Cooperation Council’s gross domestic product would depend heavily on the Strait of Hormuz, with a prolonged closure posing significant risks to economic activity. 

“With the environmental crisis and oil spill of the Russian tanker off the coast of Oman, it is a scary prospect for shipping and insurance,” Ras Khanna said, adding that the disruption could also affect tourism and place pressure on grain and crop stockpiles and reserves. 

She said a prolonged closure of the Strait would require additional spending and government support for local economies. “The prolonged closure of the Strait will have a profound effect on GDP, whose effects we have already seen across the board in the GCC,” she said. 

BMI said commercial recovery in Strait of Hormuz traffic is now expected to be delayed until the end of 2026 or the first quarter of 2027, later than its previously tentative September-October timeline.  

“We expect a strong rebound in 2027, with regional growth accelerating to 8.5 percent as hydrocarbon output recovers, trade and services activity strengthen, and post-conflict reconstruction gathers pace,” BMI said. 

Uneven regional impact 

The GCC and Iraq are expected to drive most of the downturn, with Kuwait, Bahrain, Qatar and Iraq facing the sharpest contractions in the region. BMI forecasts GDP contractions of 20.6 percent in Kuwait, 16.1 percent in Bahrain, and 12.4 percent in Qatar, as well as 19.4 percent in Iraq, citing reduced oil and gas exports tied to Hormuz disruptions. 

Oman is forecast to be the only GCC economy to record meaningful growth in 2026, at 2.9 percent, supported by record oil and gas production and its ability to export these volumes uninterrupted, bypassing the Strait of Hormuz. The UAE is expected to remain broadly stagnant at 0.3 percent growth, while Saudi Arabia is forecast to see a 1.3 percent contraction. 

North Africa shows resilience 

North African economies, including Egypt, Morocco, Algeria and Tunisia, are seen as comparatively resilient given their more limited direct exposure to the conflict, with Algeria’s forecast revised up to 3.6 percent on higher oil prices. 

BMI said risks to its 2026-27 outlook remain tilted to the downside, though the skew has moderated somewhat since July, adding that a severe El Niño event or renewed disruption to Black Sea grain exports could pose additional headwinds to the 2027 rebound.