Iraq's oil export decline pushes Mediterranean growth to a 0.7% contraction in 2026

The European Bank for Reconstruction and Development has revised its outlook for the southern and eastern Mediterranean, predicting a 0.7% contraction in 2026. The downgrade stems mainly from Iraq, where oil exports have plummeted after the Rumaila field was halted and alternative routes through Turkey carry only a fraction of normal volumes, leading to a 12.0% shrinkage in the Iraqi economy. Lebanon’s forecast also worsened to a 5.0% decline as fighting with Israel resumes, adding to a reconstruction cost of $11 billion.

When Iraq is excluded, the remaining SEMED economies are expected to expand 3.9% in 2026 and 4.3% in 2027, with Egypt, Morocco, Jordan and Tunisia showing modest growth. The EBRD anticipates a rebound in Iraqi output of 14.0% in 2027 if oil shipments normalize, and a 4.0% regional growth that depends on a lasting cease-fire.