International Monetary Fund revises growth forecast downwards, citing wars in Gaza and Sudan, as well as Red Sea attacks and lower oil output

The war in Gaza will significantly slow the pace of economic growth across the Middle East, according to the International Monetary Fund (IMF).

On Thursday, the IMF revised its 2024 growth forecast for the Middle East and North Africa (MENA) region down to 2.7 percent from its 3.4 percent October regional outlook.

“The conflict in Gaza and Israel is a key downside risk for the MENA region, particularly the risk of further escalation or a protracted conflict and disruptions to trade and shipping,” the Washington-based UN financial agency said.

Israel's war on Gaza began following the Hamas-led attacks of 7 October. On Friday, Gaza's health ministry said that 34,012 Palestinians have been killed and 76,833 wounded since then. 

According to Oxfam, 70 percent of the Palestinian enclave's infrastructure has been destroyed. More than 500,000 people have no homes to return to.

The downward revision was also driven by the war in Sudan, attacks on Red Sea shipping, lower oil output and violence in the occupied West Bank. The IMF also pointed to the existing challenges of high debt and borrowing costs.

The revised 2.7 percent figure still represents an improvement on the 1.9 percent growth recorded in 2023.

“Assuming these factors ease in 2025, growth is forecast to strengthen to 4.2 percent,” the IMF said. “Uncertainty is high and medium-term growth is forecast to remain below pre-pandemic historical averages.”

Within the region, oil exporters are forecast to fare better, with the fund projecting 2.9 percent growth, up one percentage point from last year, Reuters reported.

“The voluntary oil production cuts - most notably by Saudi Arabia - are expected to continue to put a temporary damper on growth this year,” the IMF said, adding that “higher-than-projected oil production will boost growth” for other, non-Gulf hydrocarbon producers.

Saudi Arabia and Russia led other Opec+ members last month in agreeing to extend voluntary output cuts of 2.2 million barrels per day (bpd) until the end of June to support the market. That has helped keep oil prices elevated, according to Reuters.

A meeting of top ministers from the group of oil producing countries earlier this month kept oil supply policy unchanged. The bloc is made up of the de facto Saudi-led Organization of the Petroleum Exporting Countries (Opec) and allies led by Russia.

Gulf economies are forecast to grow by 2.4 percent this year, a downward revision of 1.3 percentage points from October, the IMF said.

Pointing to plans to diversify oil-dependent economies in the region, the IMF said that non-hydrocarbon growth would be the main driver of growth in the coming years.

Prolonged disruptions to trade in the Red Sea would further impact trade volumes and shipping costs, according to the IMF, with a particular impact on Egypt due to lower Suez Canal receipts.