IMF: Iran's economy to shrink 7.6 percent this year

In its new World Economic Outlook, published on Tuesday 13 October 2026 at the annual meetings of the Fund and the World Bank in Bangkok, the International Monetary Fund forecast that Iran's economy will shrink 7.6 percent in 2026. The Fund attributed the contraction of Iran's economy to intensified sanctions and the US naval blockade.

The figure is more pessimistic than the Fund's own earlier estimates. In April this year, after the war began, the IMF had forecast Iran's economic growth at minus 6.1 percent, and in its July update it had revised that to minus 5.4 percent; now, with the Strait of Hormuz still closed and the Islamic Republic's oil exports cut off, the forecast has dropped again. In its earlier estimates the Fund had put consumer inflation in Iran this year at 68.9 percent.

The Middle East is the only region set to contract

The Fund estimates that the economy of the Middle East and North Africa region will shrink 2 percent this year, making it the only region in the world with negative growth in 2026. Kuwait's economy will shrink 16.7 percent, Iraq's 16 percent, Qatar's 15.6 percent, Bahrain's 11.3 percent, the UAE's 3.9 percent and Saudi Arabia's 3.3 percent, and Oman is the only Gulf Cooperation Council country with positive growth.

The Fund's forecasts rest on the assumption that the Strait of Hormuz will begin to reopen gradually from the Iranian month of Esfand this year (late February 2027) and that conditions will return to their pre-war state by October next year. The Fund stressed that uncertainty will remain high through the end of 2027.

The world economy and a warning on resilience

The Fund forecast global growth at 3.1 percent in 2026 and 3.4 percent in 2027, and estimated global inflation this year at 4.7 percent. Silvana Tenreyro, the Fund's chief economist, said the outlook is the net result of a negative supply shock from the Islamic Republic's war and a positive demand shock from the boom in artificial intelligence investment, and warned that the resilience of the world economy is nearing its limits.

The consequences of this crisis for the Iranian people have already been seen in the markets: Tehran bazaar shopkeepers have spoken of inflation near 90 percent and the risk of bankruptcy, freight rates from Turkey to Iran have risen more than fivefold, and US Treasury Secretary Scott Bessent has said the Islamic Republic's oil exports are effectively zero.

For the third time this year the IMF has changed its outlook for Iran's economy, and it now forecasts a 7.6 percent contraction.