IMF and World Bank October 2026 Outlook: The Gulf Shock Is About Volume, and the Wider Region Is Holding Up
Both the IMF and the World Bank now expect the GCC to contract in 2026. But the decline is driven by hydrocarbon export volumes, while non-oil activity and neighbouring markets remain resilient. This article explains how to read the numbers and what they mean for companies operating in the region.
What was published in October
In October 2026, the International Monetary Fund (IMF) and the World Bank released their latest economic outlooks within a week of each other. The World Bank published its Economic Update for the Middle East, North Africa, Afghanistan and Pakistan (MENAAP) on 6 October, and the IMF released its World Economic Outlook on 13 October during the Annual Meetings in Bangkok.
The IMF kept global growth at 3.1% for 2026, unchanged from April, and projects 3.4% for 2027. The Middle East and North Africa, however, is expected to contract by 2.0% in 2026 — the only region forecast to shrink this year. The World Bank projects contractions of 2.1% for MENAAP and 4.3% for the six Gulf Cooperation Council (GCC) economies.
- Most GCC economies are now expected to contract in 2026; only Oman grows (IMF: 4.1%)
- Both institutions expect a sharp rebound in 2027 (IMF: UAE 7.7%, Saudi Arabia 7.9%)
- The rebound reflects restored output, not stronger underlying growth
- Oil importers in the region, the Caucasus and Central Asia, and sub-Saharan Africa are holding up
GCC forecasts: IMF and World Bank compared
| Country | IMF 2026 | IMF 2027 | World Bank 2026 | World Bank 2027 |
|---|---|---|---|---|
| Saudi Arabia | −3.3% | 7.9% | −2.0% | 7.9% |
| UAE | −3.9% | 7.7% | −1.6% | 9.5% |
| Qatar | −15.6% | 18.8% | −20.9% | 26.7% |
| Kuwait | −16.7% | 17.1% | −14.6% | 22.0% |
| Bahrain | −11.3% | 13.9% | −2.9% | 4.2% |
| Oman | 4.1% | 2.2% | 3.1% | 3.4% |
| GCC | — | — | −4.3% | 10.3% |
Real GDP growth. Sources: IMF World Economic Outlook, October 2026 (Annex Table 1.1.4); World Bank MENAAP Economic Update, October 2026 (Table 1.1).
In July, the IMF still expected Saudi Arabia to grow by 1.7% and the UAE by 3.3% in 2026. Both are now forecast to contract, and the UAE's 2026 forecast has been cut by 7 percentage points since April.
The IMF assumes the Strait of Hormuz begins to reopen in March 2027 and returns broadly to pre-war conditions by October 2027. The World Bank assumes the conflict continues through the end of 2026 and conditions normalise gradually from early 2027. The IMF's later normalisation explains its deeper 2026 contractions. Bahrain shows the widest gap: −11.3% (IMF) against −2.9% (World Bank).
The contraction is about volume
The 2026 contraction reflects Gulf producers' inability to export oil and LNG through a disrupted Strait of Hormuz. Saudi Arabia, with more export routes, is less affected; Qatar and Kuwait, which depend entirely on the Strait, face double-digit contractions.
The non-oil private sector, by contrast, is accelerating. September purchasing managers' indices (PMI) reached 55.3 in both the UAE — a 20-month high — and Saudi Arabia, well above the 50 line that separates expansion from contraction.
The World Bank cautions that much of the 2027 recovery reflects the restoration of lost production and export capacity rather than stronger growth fundamentals. Infrastructure damage, delayed investment and slower recovery in tourism, logistics and investor confidence may weigh on activity after output returns. A high 2027 growth rate should not be read as market expansion.
Seen across the Middle East, Africa and Central Asia
The IMF expects commodity importers in the Middle East and North Africa to remain relatively resilient to the terms-of-trade shock, while the Caucasus and Central Asia continue to benefit from commodity prices, remittances and reform momentum.
| Group | Selected economies (IMF: 2026 → 2027) |
|---|---|
| Gulf hydrocarbon exporters | UAE −3.9% → 7.7% / Saudi Arabia −3.3% → 7.9% |
| Gulf exception | Oman 4.1% → 2.2% |
| Regional oil importers | Egypt 5.1% → 4.7% / Morocco 4.5% → 4.2% / Jordan 2.7% → 3.1% |
| Caucasus and Central Asia (5.2% → 5.0%) | Kazakhstan 4.4% → 4.9% / Uzbekistan 7.8% → 6.5% |
| Sub-Saharan Africa (4.5% → 4.5%) | Ethiopia 9.2% → 7.8% / Kenya 4.5% → 4.7% / Nigeria 4.2% → 4.3% |
Source: IMF World Economic Outlook, October 2026 (Annex Tables 1.1.4 and 1.1.5). Egypt on a fiscal-year basis.
Treating "the Middle East" as one recession story leads to the wrong decisions. The shock is concentrated in the Gulf's hydrocarbon exporters; neighbouring markets are holding up.
Risks beyond the forecasts
- Saudi Arabia’s bypass route under attack: pumping stations on the East-West Pipeline to Yanbu were struck by drones in September; the line was shut from 11 to 22 September. On 6 October the Energy Minister said flows had reached 5.8 million barrels per day.
- Riyadh airport attack: on 10 October, the Houthis struck King Khalid International Airport, killing at least 12 people and injuring more than 300.
- Oil prices: Brent settled at $106.65 a barrel on 12 October, its highest close since 15 September.
- Oil stocks: the IMF notes that global oil inventories are being drawn down by about 2.7 million barrels per day, raising the risk of a sharp price spike.
The forecasts may not fully capture the risk of continued attacks on bypass routes (our assessment). Companies should track developments alongside the headline numbers.
What companies should do now
- 1Budget 2026 as a contraction year. Factor in oil above $100, higher logistics and insurance costs, and rising selling prices in the UAE (September PMI).
- 2Keep preparing for the 2027 rebound. Licensing, entity set-up and hiring take time; do not freeze them. Model both scenarios — normalisation from early 2027 (World Bank) and from March 2027 (IMF).
- 3Review Saudi travel and security protocols. Economic resilience remains strong, but the capital's airport and energy facilities have been targeted.
- 4Do not assume a bypass route will hold. Re-test inventory, lead times and force majeure clauses against a disruption of the alternative routes themselves.
- 5Use the GCC as a hub to diversify. The IMF calls for diversifying energy supply, trade partners and sourcing. Keeping the GCC as a regional headquarters while assessing Egypt, Morocco, Central Asia and East Africa is a sound response.
The IMF and the World Bank both expect the GCC to contract in 2026, but the decline is driven by hydrocarbon export volumes, while non-oil activity and neighbouring markets remain resilient. The 2027 rebound is largely a return of lost output, and its timing depends on the reopening of the Strait of Hormuz. Companies should budget conservatively for 2026, keep preparing for 2027, account for security and bypass-route risks in Saudi Arabia, and use the GCC as a base for regional diversification.
Main sources: IMF "World Economic Outlook, October 2026"; World Bank "MENAAP Economic Update, October 2026"; S&P Global UAE PMI; Riyad Bank Saudi Arabia PMI; Reuters; CNBC; Al Jazeera; Kpler.
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