Competing economic forecasts are painting two different pictures of growth in the Middle East and North Africa (MENA) region, raising the question: what is driving the region’s outlook? The International Monetary Fund (IMF) has sharply downgraded MENA’s expected growth for 2025 to just 2.6%, citing global headwinds and oil output constraints.
In contrast, some other analysts, including Moody’s Investors Service and the Institute of Chartered Accountants in England and Wales (ICAEW), foresee a much brighter scenario, with regional growth in the 3.5–3.8% range in 2026.
The roughly one percentage-point gap between these forecasts is significant for economies across the Middle East. It boils down to differing views on the fuels of growth: how much momentum will come from recovering oil production, government investment, and consumer demand, versus how much will be dampened by global economic risks and local challenges.
Oil barrels at a depot. A partial easing of OPEC+ production cuts in 2025 is expected to boost growth in the Gulf states, one factor behind more optimistic MENA forecasts. Analysts debate how big this oil rebound effect will be on the region’s overall economy.
IMF’s View: Caution Amid Global Headwinds
In its latest regional economic outlook, the IMF delivered a sobering message. After an already muted 2024, MENA’s recovery in 2025 is likely to be slower than anticipated, barring a modest pickup in 2026. The Fund now projects aggregate growth of 2.6% in 2025, a steep drop from the 4.0% growth it had predicted for 2025 in an earlier forecast. This downgrade aligns MENA’s outlook with a broader global slowdown. IMF officials point to several drags on the region’s economy.
The major issues include trade tensions and uncertainty. Spillovers from international trade disputes, particularly a simmering trade war involving major economies, are weighing on confidence. There are also oil production cuts and price volatility.
Many MENA economies are oil exporters, so OPEC+ production policies directly affect their growth. The IMF notes that extended oil output cuts through early 2025 have constrained growth in 2023–24, and any recovery in oil production in 2025 is expected to be only gradual.
Then there are geopolitical and domestic challenges. The region’s persistent conflicts and economic reform bottlenecks are also factored into the IMF’s cautious outlook. The report warned that “ongoing conflicts in the MENA region have inflicted profound humanitarian costs and left deep economic scars,” especially hurting fragile oil-importing economies.
Several countries like Lebanon, Syria, and Yemen continue to struggle with instability, dragging down the regional average. Additionally, slower-than-expected reforms in some countries are curbing growth. The IMF cited Egypt’s delayed structural reforms as one example impacting projections.
High inflation and debt in certain economies (Egypt, Tunisia, etc.) are forcing painful adjustments that limit short-term growth. The IMF now expects the MENA oil-importing nations to collectively grow about 3.4% in 2025, a bit lower than earlier forecasts, and still below their pre-pandemic norms. This reflects issues like subsidy cuts and fiscal tightening, dampening domestic demand in those economies.
Moody’s And ICAEW See Recovery Drivers
On the other side of the spectrum, forecasts from credit rating agency Moody’s and economic analysts at ICAEW/Oxford Economics paint a more optimistic picture for MENA. They acknowledge the same obstacles as the IMF but attach more weight to the region’s growth engines, which they say are kicking into higher gear. In broad strokes, these forecasters expect MENA’s growth to accelerate more strongly in 2025, driven by a combination of rising oil activity and robust domestic demand in key economies.
The ICAEW’s latest quarterly outlook (Q2 2025) predicts Middle East GDP growth of 3.5% in 2025, up from an anaemic 1.5% in 2024. Similarly, Moody’s analysts project regional growth (for the broader MENA) to rise from roughly 2.1% in 2024 to around 2.9% in 2025, with oil-exporting countries climbing to 3.5% on average.
While their headline number for all of MENA (2.9%) isn’t as high as ICAEW’s Middle East figure, Moody’s highlights a clear rebound among the oil exporters that dominate the region’s GDP. They argue that this upswing will more than offset the continued struggles of some oil importers.
There is the oil rebound, partial but powerful. Unlike the IMF’s conservative oil assumption, analysts like those at ICAEW foresee a more substantial increase in oil production in 2025. The logic is that the OPEC+ alliance, after restraining output for two years, will begin ramping up supply to meet growing global demand (albeit cautiously).
ICAEW notes that OPEC’s recently announced plans to ease production cuts from May 2025 onward should lift Gulf economies significantly. They have revised their projections for Saudi Arabia’s oil GDP sharply upward. Expecting Saudi oil sector output to grow 5.2% in 2025, compared to just 1.9% growth assumed earlier. Similar upward revisions apply to the UAE’s oil sector (forecast +6.1% in 2025) as the country also benefits from an OPEC+ production boost.
Large-Scale Investments And Diversification Projects
Another major growth driver identified is the acceleration of domestic investment initiatives, particularly in the Gulf. Over the past few years, Saudi Arabia, the UAE, Qatar, and others have launched giga-projects and development plans (from Saudi Arabia’s Vision 2030 megaprojects to Qatar’s LNG expansion and the UAE’s infrastructure builds). Those efforts are expected to bear fruit through higher non-oil growth in 2025.
Moody’s points to “government-backed projects aimed at diversifying the economy” as a core reason for stronger 2025 growth in Gulf states. In Saudi Arabia, for example, public investment via the PIF is funding mega-developments like the NEOM futuristic city, massive tourism resorts, and new manufacturing zones. These projects are ramping up construction, creating jobs, and spurring demand for materials and services.
Domestic demand within many MENA economies, buoyed by young populations and post-pandemic recoveries, is another factor supporting growth. The World Bank and others have observed that private consumption has held up relatively well, especially in the Gulf, despite global inflation pressures.
Incomes in oil-exporting countries were sustained by government spending and subsidies, and in 2025, an expected easing of inflation (ICAEW projects GCC inflation around 2.0% in 2026) will help consumers’ purchasing power. Moreover, tourism is booming again in destinations like Dubai, Saudi Arabia, and Egypt, providing a lift to retail, hospitality, and transport sectors.
Reforms And Business Confidence
Reforms and business confidence are intangible but important elements in the momentum of economic reforms in several MENA states. For example, Saudi Arabia’s business climate reforms and social liberalisation under “Vision 2030” have started paying dividends in attracting investment and encouraging entrepreneurship (non-oil private sector growth there will be robust in 2023–2024).
The UAE’s efforts to position itself as a finance and trade hub continue to draw talent and capital. According to Moody’s, the general environment of “steady growth, declining inflation, and monetary easing” globally by 2025 will improve credit conditions and investor appetite for emerging markets, including MENA. This could lower borrowing costs and stimulate more private sector activity.
To illustrate the divergence: Moody’s expects Saudi Arabia to grow 4.7% in 2025 (after about 1.7% in 2024), driven largely by these government investments and a recovering oil sector. That is substantially above the IMF’s 3% forecast for Saudi Arabia. Similarly, Moody’s sees the UAE at 4.8% in 2025 and Egypt potentially reaching 4.0% (fiscal 2025) if reforms stay on track, all more upbeat than the IMF’s view. These differences highlight how much uncertainty exists regarding the scale of the rebound.