IMF: Houthi Attacks Have Limited Impact on Saudi Economy So Far
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The International Monetary Fund's Regional Director, Jihad Azour, stated that Houthi attacks have had a limited impact on Saudi Arabia's economy due to strong domestic demand, though geopolitical uncertainty persists. Saudi Arabia's economy is projected to contract by 3.3% this year, with the wider Gulf region expected to see a 4.8% contraction in 2026. The IMF forecasts a rebound to 9.1% growth next year, contingent on stability. Azour warned that escalating conflict would increase costs and impact investment.
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- IMF Regional Director Jihad Azour stated Houthi attacks have had a limited impact on Saudi Arabia's economy.
- Saudi Arabia's economy is projected to contract by 3.3% this year due to conflict repercussions.
- The wider Gulf region's economy is expected to shrink by 4.8% in 2026, according to the IMF.
- The IMF forecasts a strong economic rebound for the region, nearing 9.1% growth next year.
- Geopolitical uncertainty and potential conflict escalation pose significant threats to regional stability and investment.
- Azour warned that further infrastructure damage and fighting would lead to higher economic costs.
The International Monetary Fund (IMF) Regional Director, Jihad Azour, stated that Houthi attacks have had a "limited" impact on Saudi Arabia to date, attributing this resilience to strong domestic demand. Despite this, geopolitical uncertainty remains a significant threat.
In recent weeks, Iran-backed Houthis have intensified their attacks on Saudi Arabia, targeting oil facilities, airports, and military sites. This escalation follows the collapse of a 2022 truce and a resurgence of conflict between the Houthis and the Riyadh-backed Yemeni government.
Saudi Arabia, the world's largest oil exporter, has faced potential shipping disruptions due to Iran's blockade of the Strait of Hormuz and the Houthis' declaration of a blockade on Red Sea shipping. However, according to Azour, shipments have continued to flow.
Azour explained that the Kingdom's robust domestic demand and solid public sector have mitigated the impact of the attacks. Nevertheless, Saudi Arabia's economy is projected to contract by 3.3% this year, influenced by the repercussions of a conflict that reportedly began with U.S.-Israeli strikes on Iran on February 28. The IMF's regional report indicated that most Gulf states, excluding Oman, have seen a decline in hydrocarbon production, with the region's economy expected to shrink by 4.8% in 2026.
The IMF anticipates a strong rebound next year, with growth nearing 9.1%, despite considerable uncertainty stemming from ongoing geopolitical tensions and stalled indirect talks between Washington and Tehran. The Iranian Revolutionary Guard has threatened to broaden the conflict if the U.S. military continues to escort ships through the Strait of Hormuz. U.S. and international media reports suggest Washington and Israel are preparing for a new wave of strikes on Iran, potentially after the U.S. midterm elections on November 3.
Azour warned that further damage to infrastructure and a resumption of fighting would significantly increase costs. He noted that current forecasts assume stable oil prices, which are higher than pre-war levels but lower than they could be amid escalating regional tensions. The ability to attract investment and talent, he added, will depend on stability, acknowledging that the "scars of war will remain for a few years" but asserting that the "foundations of the Saudi economy are solid."
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