Challenges of Conflict and Industrial Policy for Development

Abstract

The Middle East, North Africa, Afghanistan, and Pakistan (MENAAP) region is facing conflict, exacting a serious human and economic toll and heightening geopolitical uncertainty. Disruptions to key energy supply routes and infrastructure have affected markets, driven financial volatility, and weakened the 2026 growth outlook. Excluding Iran, overall growth in the region is expected to slow from 4.0 percent in 2025 to 1.8 percent for 2026. This forecast stands 2.4 percentage points below the World Bank Group’s January projections.