## Executive Summary

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### Economic developments and outlook: Resilience in the face of high global uncertainty and geopolitical tensions
- Economic performance in the Middle East and North Africa, Afghanistan, and Pakistan (MENAP) and the Caucasus and Central Asia (CCA) has remained generally robust in 2025 as both regions largely avoided the direct fallout from higher US tariffs and global trade disruptions, whereas recent regional geopolitical tensions had only a limited and short-term impact.
- MENAP oil exporters have benefited from increased oil production as the unwinding of OPEC+ cuts accelerated.
- MENAP oil importers saw gains from robust demand sustained by low energy prices, strong remittances, and buoyant tourism.
- Growth in the CCA region continued to exceed expectations, driven by solid domestic demand, credit expansion, and hydrocarbon exports.
- Despite relatively tight monetary policy stances, financial market conditions remain supportive:
  - Sovereign spreads have narrowed.
  - Nominal exchange rates depreciated.
  - Several countries successfully accessed international financial markets.
- Inflation trends diverged:
  - Easing across most MENAP economies thanks to falling food and energy prices.
  - Rising in many CCA countries because of strong demand and imported price pressures.
- Outlook:
  - GDP growth in the MENAP region is expected to strengthen gradually, supported by higher oil output, resilient local demand, and ongoing reforms.
  - In CCA economies, growth is projected to slow to a more sustainable pace.
  - Inflation is projected to ease in most countries, helped by lower projected energy prices and projected tightening of fiscal policy stances, on account of progress in mobilizing revenues and rationalizing spending, including through subsidy reforms.

### Risks: Not out of the woods yet
- Delayed adverse effects from global uncertainty cannot be ruled out.
- Key downside risks:
  - Lower global demand.
  - Tightening of global financial conditions.
  - Fiscal concerns and stronger-than-projected inflationary pressures in key advanced economies could result in higher borrowing costs, affecting countries with greater government financing needs and banking sectors heavily exposed to government debt.
- Regional vulnerabilities:
  - Renewed geopolitical tensions.
  - Increasing frequency and severity of climate-related shocks, which could disrupt economic activity and undermine stability.
- Upside possibilities:
  - Faster-than-expected resolution of conflicts.
  - More aggressive implementation of long-standing structural reforms could provide a meaningful boost to growth across both regions.

### Policy priorities: Build buffers, strengthen policy frameworks, and accelerate structural reforms
- Use current growth momentum to bolster fiscal and external buffers, particularly in economies where these are limited.
- Strengthen institutional frameworks to enhance resilience:
  - Enhance medium-term fiscal policy frameworks to better anchor long-term fiscal sustainability.
  - Strengthen monetary institutional frameworks to improve policy effectiveness and predictability, which can help better anchor inflation expectations.
- Accelerate structural reforms oriented toward:
  - Economic diversification.
  - Private sector development.
  - Lifting medium-term growth prospects and seizing opportunities presented by a changing global economic landscape.

*Executive Summary — October 2025 • INTERNATIONAL MONETARY FUND*

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_Source: https://www.imf.org/-/media/files/publications/reo/mcd-cca/2025/october/english/execsum.pdf_