The International Monetary Fund (IMF) — the global lender that monitors economies and advises governments — has warned that the Gulf’s oil-exporting economies are heading for a deep contraction in 2026, with only Oman expected to grow. The warning matters greatly for Pakistan, because millions of Pakistanis work in the Gulf and send money home.
A sharp downgrade
In its October 2026 World Economic Outlook, the IMF projected that the Middle East and Central Asia region will shrink by 0.3 percent in 2026, after growing 3.7 percent in 2025. That is a downgrade of 2.2 percentage points from its April forecast, reflecting a longer closure of the Strait of Hormuz — the narrow waterway through which much of the world’s oil passes — than it had assumed in April.
The Fund said the downgrade is concentrated among Gulf oil exporters directly affected by the conflict. Gulf Cooperation Council economies as a group are now expected to contract in 2026, with a rebound of about 9 percent projected for 2027 — but only if hostilities ease and shipping through Hormuz recovers gradually.
Which countries, and by how much
The steepest falls are in the smaller Gulf producers most affected by disruptions to energy output and transport. Kuwait’s economy is projected to shrink 16.7 percent in 2026, Iraq’s by 16.0 percent, Qatar’s by 15.6 percent and Bahrain’s by 11.3 percent. Saudi Arabia, which has more diversified export routes, is projected to contract 3.3 percent, and the United Arab Emirates by 3.9 percent. Oman is the exception, forecast to grow 4.1 percent.
The Fund reported that Gulf oil and gas output fell from about 33 million barrels a day in February to roughly 19 million in May, recovered somewhat over the summer but stayed about 30 percent below February levels, and fell again in August. By July, cumulative supply losses had reached 1.8 billion barrels. A barrel is the standard unit for measuring oil, equal to about 159 litres.
What it means for Pakistan
Remittances — money sent home by Pakistanis working abroad — are one of Pakistan’s most important sources of foreign exchange. In July–September 2026 alone, Pakistan received $10.88 billion in remittances, up 14 percent from a year earlier. Saudi Arabia was the largest source at $2.687 billion, followed by the UAE at $2.236 billion. Together, those two countries supplied about 45 percent of the quarter’s total, before counting Qatar, Kuwait, Oman and Bahrain.
That is why a Gulf slowdown is not a distant story for Pakistani families. Construction, hospitality and services — the sectors that employ many Pakistani workers — are typically the first to slow when governments and companies conserve cash. A slowdown in hiring or wages would feed directly into household spending, housing and small businesses back home. The IMF’s own regional chief has warned that the shock will have a scarring effect and that economies will not return to their pre-war path in the near future, even if a rebound comes in 2027.
One caution is important: these are forecasts, not outcomes. They assume the conflict eases after the first quarter of 2027 and Hormuz flows recover gradually. If the conflict lasts longer, the outlook would worsen; if it ends sooner, the recovery could come faster. For families depending on Gulf incomes, the practical lesson is the same as for investors: plan cautiously, and do not treat a forecast rebound as money already in hand.
Sources: International Monetary Fund, Business Recorder, Express Tribune. Written in our own words for information only — not investment advice.