The International Monetary Fund (IMF) said Middle Eastern economies would grow slower this year than they had projected as the war in Gaza and lower oil output added to existing challenges. The IMF has revised its 2024 growth forecast for the region to 2.4%, down from its previous estimate of 2.7%.

The Washington-based fund said in the latest update of its World Economic Outlook that inflation remains a concern in some oil-importing economies in the Middle East, but the continuing conflict between Israel and Hamas largely dents the growth prospects.

The region faces significant uncertainty this year as the conflict threatens to spill into the broader region.

Additionally, an extension of oil production cuts by OPEC+ will further dampen growth in oil-exporting economies like Saudi Arabia. The IMF has revised Saudi Arabia’s 2024 growth projection to 1.7%, down from 2.6%.

While Saudi Arabia, the world’s top oil exporter, has benefitted from the roughly 10% rise in crude prices this year due to OPEC+ production cuts, the extension of these cuts will ultimately impact its growth potential.

The IMF’s report highlights the delicate balancing act for the global economy. While inflation remains a concern, central banks risk hindering growth by raising interest rates too aggressively. Additionally, geopolitical tensions and ongoing supply chain disruptions could further complicate the road to recovery.