The World Bank has released a mixed economic outlook for the MENAAP region (Middle East, North Africa, Afghanistan, and Pakistan). The Washington-based lender increased its $2025$ GDP growth forecast for the region to an average of $2.8\%$, an improvement from its April prediction of $2.6\%$.

Key Drivers of $2025$ Growth:

• Gulf States: Economic activity is up due to quicker-than-anticipated adjustments to oil production cuts and strong growth in the non-oil sector.

• Oil-Importing Countries: The outlook has brightened, boosted by growth in private consumption, investment, agriculture, and tourism.

Causes for Concern and $2026$ Trim:

• The bank warned that developing oil exporters face a significant slowdown due to regional conflict disruptions and cuts in oil output.

• Iran’s economy is projected to shrink by $1.7\%$ in $2025$ and $2.8\%$ in $2026$, a major reversal. This downturn is attributed to the reimposition of UN sanctions, a contraction in both oil exports and non-oil business, and disruption following conflict in June.

• Overall, the region’s outlook is still hampered by the severe economic contractions, humanitarian crises, and mass displacement caused by conflicts in Syria, Yemen, Lebanon, the West Bank and Gaza, and Afghanistan. Neighboring nations are also negatively impacted by the resulting refugee flows and heightened insecurity.

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