The IMF's Crosscurrents Update: Africa Is on the Wrong Side of Both Shocks, and Still Outgrowing the World

The July World Economic Outlook Update barely moves the Fund's Africa forecasts, and its baseline has already been overtaken: the Strait of Hormuz was assumed to begin reopening in mid-July, and by 13 July fighting had resumed instead. Beneath the flat average the Fund sorts the continent into the cushioned, the upgraded and the squeezed, while sub-Saharan Africa keeps outgrowing the world with both crosscurrents against it.

[caption id="attachment_28617" align="aligncenter" width="900"] Photo by Eva Blue on Unsplash[/caption]

The least informative numbers in the International Monetary Fund's (IMF) July update are the ones Africa-watchers will quote most. Sub-Saharan Africa is projected to grow by 4.3 per cent in 2026, a revision from April of exactly zero, and by 4.5 per cent in 2027, a revision of plus 0.1 points. On that evidence, nothing happened.

The rest of the World Economic Outlook Update, published on 8 July as "Global Economy in Crosscurrents of War and Technology", describes a world pulled in two directions: a Middle East war that has closed the Strait of Hormuz and left energy prices roughly 25 per cent above prewar levels, and an AI investment boom lifting the economies wired into the technology supply chain. Africa sits on the wrong side of both. The Fund's own text concedes what its table conceals: the regional figure "masks substantial divergence across countries, reflecting differences in policy space, reform implementation, and exposure to external shocks".

Even so, the region clears the world's bar comfortably. With global growth projected at 3.0 per cent in 2026 and 3.4 per cent in 2027, sub-Saharan Africa outgrows the world by 1.3 points this year and 1.1 next. "The world economy has weathered the shock from the war better than feared so far, with limited evidence of second round effects," Petya Koeva Brooks, deputy director of the IMF's research department, told the launch press conference. Africa is weathering it without the offset.

A Boom That Passes the Continent By

The Update's arithmetic of winners is blunt. The four largest net exporters of AI-related hardware (Taiwan Province of China, Korea, Thailand and Malaysia) beat the Fund's first-quarter growth projections by an average of 4.4 percentage points; the rest of the world undershot by 0.3 points. Korea alone grew at an annualised 7.5 per cent against the 1.8 per cent projected in April. That boom is what rescues the global 2027 number. None of its named beneficiaries is African.

The war's channels, by contrast, run straight through African import bills. On market pricing as of 10 June, the Fund assumes oil averaging $89 a barrel in 2026 and projects fertiliser prices rising 26 per cent and food prices 8 per cent this year. For oil-importing, non-resource-intensive economies, those three lines largely are the forecast. The Update's most consequential sentence for the continent concerns even its bigger economies, which "are largely absent from the AI-driven global technology upswing and face headwinds from the decline in official development assistance".

Cushioned, Upgraded, Squeezed

The near-flat average is the sum of three different fates.

The cushioned. Nigeria holds at 4.1 per cent for 2026 and 4.3 per cent for 2027, unchanged from April, supported in the Fund's words by "improved macroeconomic stability and favorable terms-of-trade effects". The same paragraph expects costlier essentials to "further aggravate poverty and food insecurity"; a terms-of-trade cushion is not a welfare policy. Angola's cushion is thinner still. The Fund's Article IV consultation, concluded in May, called higher oil prices "a temporary offset" to a structural revenue decline, with production down nearly 40 per cent to about 1.05 million barrels a day in 2025. Price is doing the work that barrels no longer can.

The upgraded. Egypt earned the continent's largest revision, upgraded 0.4 points to 4.6 per cent growth for the 2026/27 fiscal year. The award came while the Fund expects the wider Middle East and North Africa region to contract by 0.5 per cent in 2026. The reasoning is policy: regional business press points to reform delivery and firmer macroeconomic stability under its Extended Fund Facility programme. South Africa's move is smaller, up 0.1 points to 1.1 per cent for 2026, credited to "strengthened policy frameworks and ongoing structural reforms". Just three African economies are named in the Update's tables; the two upgrades among them were earned in finance ministries, not commodity markets.

The squeezed. Strip out Nigeria and South Africa and the rest of the region slows from 5.6 per cent in 2025 to 5.2 per cent in both 2026 and 2027, on the Update's figures. Inside that average sit the economies holding none of the cards: importers of fuel and fertiliser, borrowers exposed to any repricing of sovereign risk, and states that depend on shrinking aid. Abebe Selassie, director of the IMF's African department, put the regional forecast some 0.3 points below its pre-war path in April, and observed that the aid decline lands hardest on fragile, low-income countries where assistance finances budgets, healthcare and food programmes.

The sorting is a reading of external accounts, not geography: it holds wherever fuel, fertiliser and foreign assistance dominate the balance of payments, and it breaks where policy credibility outweighs commodity exposure.

The Shock Absorber Is Being Removed

What separates this war shock from earlier ones is what no longer arrives afterwards. The Fund's April Regional Economic Outlook, "Hard-Won Gains Under Pressure", gave the subject its own chapter, "Aid Cuts in Sub-Saharan Africa: This Time Is Different", estimating that bilateral aid was cut by 16 to 28 per cent in 2025 and judging the contraction "larger, more synchronized across countries, and predominantly donor driven" than past episodes. Earlier aid cycles turned: donors retrenched, then returned. This one, on the Fund's reading, is structural. The July Update lists the consequence among its risks: shrinking official development assistance complicates fiscal adjustment in low-income countries just as an Ebola public health emergency and an extraordinarily strong El Niño loom. Lord Waverley argued in these pages last September that Africa's new optimism rests on partnership rather than paternalism, and warned that Western aid withdrawal would leave vacuums for others to fill. The Fund has now put numbers on the withdrawal.

What to Be Sceptical About

The flat 4.3 rests on an assumption that failed within days of publication. The Update's baseline had the reopening of the Strait of Hormuz beginning in mid-July, with conditions broadly back to prewar norms by March 2027. Instead the mid-June truce between Washington and Tehran unravelled: strikes had resumed by 13 July, when Iran's military said it had struck two tankers in the strait, and US Central Command reimposed the naval blockade of Iranian ports the next day. By late July the fighting had widened further, with US-Iran talks over control of the strait deadlocked and the waterway still shut. Bloomberg tanker tracking put crude flows through the strait at about 5.5 million barrels a day in the seven days to 15 July, down from roughly 9.4 million the week before. The downside the Fund sketched, inventories near multiyear lows and every import-price channel widening, is now materialising. It sharpens rather than overturns the sorting above: each contested week widens the gap between the cushioned, the upgraded and the squeezed. The technology side has its own warning label: the Update flags "frothy equity valuations" in AI-exposed markets, and a correction would shrink the very world number Africa outgrows. Convergence against a stalling world is consolation by arithmetic. Egypt's upgrade is partly timing: the Fund removed 0.4 points from fiscal 2027/28 as it added them to 2026/27. And the unchanged regional aggregate is largely two heavyweight anchors sitting on a slowing remainder.

The Markers That Will Decide It

Whether the region's fastest growth run in a decade, 4.5 per cent in 2025 by the Fund's April estimate, survives 2026-27 hangs on watchable things. Whether the strait reopens on anything like the Fund's timetable, and which economies' foreign reserves and fiscal buffers hold while it stays contested. Fertiliser and food prices into the coming planting seasons, the channel the Fund's darkest scenario runs through: smallholder food systems that it says cannot outbid wealthier buyers. Donor budgets, which will test how structural the aid contraction proves. Reform continuity where the upgrades were earned, Egypt's programme reviews above all. Furthest out, whether any African economy begins plugging into the technology cycle; the Update names the preconditions without sentiment: electricity supply, digital infrastructure, skills. That is the playbook the World Bank's Indermit Gill and M Ayhan Kose set out for developing economies in 2024: investment booms, they argued, are engineered by policy packages. The growth premium is real, and it has survived the first year of a war it did not start. What it has not yet won is a share of the boom on the far side of the crosscurrent. The 2027 columns will show whether that has begun to change.

Sources

1. IMF, World Economic Outlook Update, July 2026: "Global Economy in Crosscurrents of War and Technology", 8 July 2026. https://www.imf.org/en/publications/weo/issues/2026/07/08/world-economic-outlook-update-july-2026 (PDF: https://www.imf.org/-/media/files/publications/weo/2026/update/july/english/text.pdf). Accessed 18 July 2026. Full text read via a byte-identical mirror copy (https://ent.news/2026/7/361.pdf) because imf.org returned HTTP 403 to the research tools; all figures cross-checked against independent reports (sources 9-11).

2. IMF Media Center, "IMF - July 26 World Economic Outlook Update" (press-conference summary, remarks by Petya Koeva Brooks), 8 July 2026. https://mediacenter.imf.org/news/imf---july-26-world-economic-outlook-update/s/26e6f084-64f7-435a-8dee-331f26a4d2ce. Accessed 18 July 2026.

3. IMF, Press Briefing Transcript: World Economic Outlook Update, 8 July 2026. https://www.imf.org/en/news/articles/2026/07/08/tr070826-weo-press-briefing-transcript-july-8-2026. Existence confirmed via search; page not retrievable in-session (HTTP 403). Accessed 18 July 2026.

4. IMF, Regional Economic Outlook for Sub-Saharan Africa, April 2026: "Hard-Won Gains Under Pressure", 16 April 2026. https://www.imf.org/en/publications/reo/ssa/issues/2026/04/16/regional-economic-outlook-for-sub-saharan-africa-april-2026. Content obtained via search excerpts (PDF blocked in-session). Accessed 18 July 2026.

5. IMF, REO Sub-Saharan Africa April 2026, Chapter 2: "Aid Cuts in Sub-Saharan Africa: This Time Is Different". https://www.imf.org/-/media/files/publications/reo/afr/2026/april/english/ch2.pdf. Content via search excerpts. Accessed 18 July 2026.

6. Abebe Selassie, Introductory Remarks, IMF African Department Press Briefing, 2026 Spring Meetings, 16 April 2026. https://www.imf.org/en/news/articles/2026/04/16/sp041626-subsaharan-africa-press-briefing-abebe-selassie. Content via search excerpts. Accessed 18 July 2026.

7. IMF, World Economic Outlook, April 2026: "Global Economy in the Shadow of War", 14 April 2026 (comparison baseline: global growth 3.1 per cent 2026, 3.2 per cent 2027). https://www.imf.org/en/publications/weo/issues/2026/04/14/world-economic-outlook-april-2026. Accessed 18 July 2026.

8. IMF, Press Release No. 26/135: "IMF Executive Board Concludes 2026 Article IV Consultation with Angola", 1 May 2026. https://www.imf.org/en/news/articles/2026/05/01/pr26135imf-executive-board-concludes-2026-article-iv-consultation-with-angola. Content via search excerpts. Accessed 18 July 2026.

9. Zawya (Arab Finance), "IMF raises Egypt's FY2026/27 GDP growth forecast to 4.6%", July 2026. https://www.zawya.com/en/economy/north-africa/imf-raises-egypts-fy2026-27-gdp-growth-forecast-to-46-gtjv3wti. Accessed 18 July 2026.

10. The Astana Times, "IMF Sees Global Growth Holding Steady Despite Middle East War Shock", July 2026. https://astanatimes.com/2026/07/imf-sees-global-growth-holding-steady-despite-middle-east-war-shock/. Fetched 18 July 2026.

11. CNBC Africa, "IMF's July 2026 World Economic Outlook" (interview with Deniz Igan, Division Chief, IMF Research Department), July 2026. https://www.cnbcafrica.com/media/7783529459895/imfs-july-2026-world-economic-outlook. Fetched 18 July 2026.

12. CFI.co, Lord Waverley, "Africa Enters an Age of Optimism", 7 September 2025. https://cfi.co/africa/2025/09/africa-enters-an-age-of-optimism/. Fetched 18 July 2026.

13. CFI.co, "World Bank: How to Accelerate Growth and Progress in Developing Economies", 26 March 2024. https://cfi.co/menu/multilaterals/2024/03/world-bank-how-to-accelerate-growth-and-progress-in-developing-economies/. Fetched 18 July 2026.

14. CNN live coverage, "US resumes strikes while Iran says it struck two tankers in Strait of Hormuz", 13 July 2026. https://www.cnn.com/2026/07/13/world/live-news/iran-war-trump. Headline and summary via search, 18 July 2026.

15. CNN live coverage, "US naval blockade of Iranian ports goes into effect", 14 July 2026. https://www.cnn.com/2026/07/14/world/live-news/iran-war-trump. Via search, 18 July 2026.

16. NPR, "The U.S. is back to blockading Iran as the Strait of Hormuz standoff escalates", 14 July 2026. https://www.npr.org/2026/07/14/nx-s1-5893257/us-iran-updates. Via search, 18 July 2026.

17. Bloomberg, "US-Iran Truce Collapses as Attacks Worsen and Hormuz Blockade Returns", 14 July 2026. https://www.bloomberg.com/news/articles/2026-07-14/us-iran-truce-collapses-as-attacks-worsen-and-blockade-returns. Headline via search, 18 July 2026.

18. Bloomberg (syndicated in The Spokesman-Review), "Iran-US hostilities worsen as Hormuz shipping traffic falls", 16 July 2026. https://www.spokesman.com/stories/2026/jul/16/iran-us-hostilities-worsen-as-hormuz-shipping-traf/. Via search, 18 July 2026 (source of the tanker-tracking flow figures).

19. CNN live coverage, "Iran and US widen attacks as renewed conflict shows no sign of de-escalating", 17 July 2026. https://www.cnn.com/2026/07/17/world/live-news/iran-war-trump. Headline via search, 18 July 2026. Cross-checks: ABC News timeline of the ceasefire/MOU breakdown (https://abcnews.com/Politics/us-iran-ceasefire-mou-broke-timeline/story?id=134622392); Wikipedia, "2026 Strait of Hormuz crisis" (timeline cross-reference only, fetched 18 July 2026).


Singapore: Where the AI Capex Boom Becomes GDP

Singapore's advance estimate puts second-quarter growth at 5.7 per cent, with manufacturing up 12.2 per cent on what the trade ministry attributes to AI-related demand for chips and chip-making equipment. It is the cleanest primary-source evidence yet that the AI capital-expenditure boom has a working channel into a real economy, and the channel runs on into Southeast Asia.

[caption id="attachment_28615" align="aligncenter" width="900"] Photo: Pixabay / Pexels[/caption]

On 14 July the Ministry of Trade and Industry (MTI) released advance estimates that cheerleaders and sceptics of the AI boom should read with equal care. Singapore's economy grew 5.7 per cent year on year in the second quarter of 2026, ahead of the 5.5 per cent consensus in Reuters and Bloomberg polls, though easing from 6.3 per cent in the first quarter. The engine was never in doubt. Manufacturing expanded 12.2 per cent, accelerating from 8.0 per cent, on what the ministry described as output increases in the electronics and precision engineering clusters "on account of strong AI-related demand for semiconductors and semiconductor manufacturing equipment respectively".

Evidence for the boom has so far lived mainly in corporate accounts: hyperscaler capital-expenditure guidance, chipmakers' order books, equipment billings. A national statistical office measuring the same force as output, in a small open economy where trade dwarfs domestic demand, is different in kind: the capital-spending cycle surfacing in a real economy's GDP, counted by the people whose job is to count.

From Server Halls to Wafer Starts

The mechanism is short and concrete. Futurum Group's February aggregation of company guidance puts combined 2026 capital spending by Microsoft, Alphabet, Amazon, Meta and Oracle at US$660 billion to US$690 billion, up from roughly US$380 billion in 2025. Most of that money becomes data centres, and data centres are built from silicon: memory, logic, and the machines that etch, deposit, test and package them. Singapore manufactures on both sides of the order book: its electronics cluster makes the chips, its precision engineering cluster the equipment and modules that make them. The ministry's two named clusters map exactly onto the two things a data-centre building programme must buy.

Corroboration arrived three days later. Enterprise Singapore's trade figures for June, published on 17 July, show non-oil domestic exports up 20.7 per cent year on year, with electronics shipments up 105.1 per cent on AI-related demand while non-electronics fell 2.9 per cent. The GDP release itself shows the same fingerprint: MTI notes that wholesale trade's machinery, equipment and supplies segment grew in line with strong electronics exports. And on a seasonally adjusted quarterly basis, manufacturing rose 5.3 per cent, reversing a 2.2 per cent dip in the first quarter. Whatever is driving Singapore's factories accelerated through the spring.

The Evidence on the Ground

The attribution is not only the ministry's. On 27 January, Micron broke ground on an advanced NAND wafer fabrication plant in Singapore: about US$24 billion over ten years, first output planned for the second half of 2028, around 1,600 new jobs. Together with the US$7 billion high-bandwidth memory packaging facility announced earlier, the company expects some 3,000 new positions on the island. Manish Bhatia, Micron's executive vice president of global operations, said the investment "underscores Micron's long-term commitment to Singapore" in a market remade by AI demand. Employment is the part of the channel that GDP tables understate: the chips leave, the jobs stay.

Chua Han Teng, senior economist at DBS Bank, read the estimates as proof of resilience despite the shock from the Middle East. The release holds that tension in miniature: by MTI's account the chemicals cluster contracted on conflict-driven feedstock disruptions while the chip lines ran hot.

Down the Supply Chain

The channel does not stop at the causeway.

Malaysia. Electrical and electronics exports rose 39.7 per cent year on year in the first five months of 2026, to RM382.9 billion (US$95.7 billion), almost half of total exports, with semiconductor shipments up 61.6 per cent, per trade agency Matrade's June figures.

Vietnam. Exports of computers, electronic products and components reached nearly US$56.2 billion between January and May, up 46.2 per cent year on year, on customs data reported by state broadcaster VOV.

The Philippines. The mildest pulse so far. The Semiconductor and Electronics Industries in the Philippines Foundation projects growth of about 5 per cent for 2026, taking exports past US$50 billion after a 16 per cent rise in 2025.

The gradient is itself the finding. The more a country's factories sell into AI infrastructure, advanced chips, packaging and equipment, the hotter the numbers; the further its output sits from the data centre, the fainter the signal. How far down the chain the impulse reaches is the open question for the region's convergence story.

What the Advance Estimate Cannot Say

The caveats start with the estimate itself. It is computed largely from April and May data, and MTI's own footnote warns that it is subject to revision when more comprehensive figures become available; the fuller preliminary estimates, with sources of growth, employment and productivity, arrive in the Economic Survey of Singapore in August. The AI attribution, meanwhile, is for now the ministry's sentence rather than a firm-level accounting: consistent with the export data and with Micron's dated, costed commitments, but not yet decomposed.

The sharper caution is narrowness. Non-electronics exports fell in June. Chemicals and biomedical manufacturing contracted in the quarter. The consumer-facing services group, spanning food services to real estate, grew 2.7 per cent, slowest in the economy, and Jonathan Koh of Standard Chartered observes that consumer sectors are lagging even with a healthy labour market. This was a single-engine quarter. A channel efficient enough to carry a capex boom into GDP within a year will carry a capex pause just as faithfully, and memory and chip-making equipment sit among the most cyclical goods in world trade.

A Fortnight of Tests

Validation came quickly. The Monetary Authority of Singapore (MAS) held its exchange-rate settings unchanged at its statement on 30 July, keeping the S$NEER slope, width and centre, as economists polled by Bloomberg had expected after benign May inflation. How MAS weighs the AI-demand offset against tariff and Middle East drag will be read well beyond the island: Singapore remains the Asia-Pacific region's leading financial centre, a position CFI.co surveyed in 2023.

The official forecast still reads 2.0 to 4.0 per cent, maintained on 25 May when MTI judged that downside risks had risen with the US-Israel-Iran conflict. Brian Lee of Maybank Securities expects an upgrade to 4 to 5 per cent at the August review. Private forecasts have already moved: OCBC's Selena Ling, who argues the AI manufacturing boom "still has legs to run", lifted her full-year call to 4.3 per cent, and United Overseas Bank, whose board architecture CFI.co examined in April, now expects 4.8 per cent.

The reading travels selectively. For open, electronics-weighted trading economies, Singapore's quarter is evidence that AI capital spending is now a measurable demand channel; for domestically driven economies it says little, and even within Singapore it has so far bypassed the consumer. The cycle now has a paper trail in a national ledger: revisable, ministry-attributed, but counted. The entries to check next are the August survey and that Philippine 5 per cent, which will show whether the channel deepens down the supply chain or thins out before the furthest links feel it.

Sources

1. Ministry of Trade and Industry, press release, "Singapore's GDP Grew by 5.7 Per Cent in the Second Quarter of 2026", 14 July 2026. https://www.mti.gov.sg/newsroom/singapore-s-gdp-grew-by-5-7-per-cent-in-the-second-quarter-of-2026/ (full PDF: https://isomer-user-content.by.gov.sg/166/9470182a-afbb-4e97-93f1-ce2b1094ef65/AdvEst_2Q26.pdf). Accessed 18 July 2026; PDF read in full.

2. Ministry of Trade and Industry, advisory, "Release of Advance GDP Estimates for Second Quarter 2026", 7 July 2026. https://www.mti.gov.sg/newsroom/release-of-advance-gdp-estimates-for-second-quarter-2026/ (PDF: https://isomer-user-content.by.gov.sg/166/8b5b0063-a3a7-4ab5-9422-ad2dc21a846d/Adv%20GDP%20Est%202Q26_Press%20Statement.pdf). Accessed 18 July 2026; PDF read in full.

3. Ministry of Trade and Industry, "MTI Maintains 2026 GDP Growth Forecast at 2.0 to 4.0 Per Cent", 25 May 2026. https://www.mti.gov.sg/newsroom/mti-maintains-2026-gdp-growth-forecast-at--2-0-to-4-0-per-cent-/. Accessed 18 July 2026.

4. Xinhua, "Singapore June non-oil domestic exports growth eases to 20.7 pct" (reporting Enterprise Singapore data of 17 July 2026), 17 July 2026. https://english.news.cn/20260717/fcb12266be40485eafbec55875b11a16/c.html. Accessed 18 July 2026. Intermediary for the Enterprise Singapore release.

5. CNBC, "Singapore's economy expands 5.7% in the second quarter, beating expectations", 14 July 2026. https://www.cnbc.com/2026/07/14/singapore-gdp-iran-war-impact-takes-hold.html. Accessed 18 July 2026.

6. Bloomberg (republished by The Edge Malaysia), "Singapore on track to beat cautious official forecast on AI boom", mid-July 2026. https://theedgemalaysia.com/node/810530. Accessed 18 July 2026.

7. Monetary Authority of Singapore, Advance Release Calendar. https://www.mas.gov.sg/monetary-policy/advance-release-calendar. Attempted 18 July 2026; page returned a service-unavailable error, "no later than 31 July 2026" taken from the page's search-index snippet and corroborated by source 6.

8. Futurum Group, "AI Capex 2026: The $690B Infrastructure Sprint", 12 February 2026. https://futurumgroup.com/insights/ai-capex-2026-the-690b-infrastructure-sprint/. Accessed 18 July 2026. Analyst aggregation of company guidance, attributed by name in the body.

9. Micron Technology, press release, "Micron Breaks Ground on Advanced Wafer Fabrication Facility in Singapore", 27 January 2026, via GlobeNewswire. https://www.globenewswire.com/news-release/2026/01/27/3226056/0/en/Micron-Breaks-Ground-on-Advanced-Wafer-Fabrication-Facility-in-Singapore.html. Accessed 18 July 2026.

10. Singapore Economic Development Board, media release, "Micron breaks ground on new HBM advanced packaging facility in Singapore" (US$7 billion investment, jobs figures). https://www.edb.gov.sg/en/about-edb/media-releases-publications/micron-breaks-ground-on-7billion-hbm-facility-in-singapore.html. Accessed via search 18 July 2026.

11. TechNode Global, "Malaysia's AI-led technology and energy exports drive trade surplus to record high in first five months" (reporting Matrade data), 22 June 2026. https://technode.global/2026/06/22/malaysias-ai-led-technology-and-energy-exports-drive-trade-surplus-to-record-high-in-first-five-months/. Accessed via search 18 July 2026. Intermediary for Matrade.

12. VOV (Voice of Vietnam), "Electronics exports forecast to grow up to 20% in 2026" and related trade reports. https://english.vov.vn/en/economy/electronics-exports-forecast-to-grow-up-to-20-in-2026-post1311040.vov. Accessed via search 18 July 2026. Intermediary for Vietnamese customs data.

13. BusinessMirror, "Semicon exports could near $50B in 2026 - Seipi", 1 January 2026, and BusinessWorld, "Philippine semiconductor exports may reach $50B this year", 12 March 2026. https://businessmirror.com.ph/2026/01/01/semicon-exports-could-near-50b-in-2026-seipi/ and https://www.bworldonline.com/editors-picks/2026/03/12/735732/philippine-semiconductor-exports-may-reach-50b-this-year/. Accessed via search 18 July 2026. Intermediaries for SEIPI.

14. Related CFI.co coverage woven in body: https://cfi.co/asia-pacific/2026/04/governance-as-capital-protection-how-uobs-board-architecture-reinforces-resilience-in-singapores-banking-system/ and https://cfi.co/asia-pacific/2023/01/singapore-the-leading-financial-centre-in-the-asia-pacific-region/.


The IMF's Wartime Audit of the UAE: What Gulf Resilience Is Made Of

The Fund's July health-check names the buffers and instruments that let a diversified Gulf economy absorb a regional war. The harder question, for every neighbouring treasury, is which parts of the kit can be copied.

[caption id="attachment_28613" align="aligncenter" width="900"] Photo: Mikhail Nilov / Pexels[/caption]

An International Monetary Fund (IMF) staff team spent 7 to 16 July in Abu Dhabi and Dubai, taking the measure of an economy four and a half months into a regional war. The Strait of Hormuz has been effectively closed for most of the period since late February, per AGBI and wire coverage. A ceasefire reached in June had already collapsed. US strikes resumed on 13 July, with the team still in the field, and the naval blockade returned a day later, as CNN and NPR reported. The concluding statement mission chief Said Bakhache issued on 17 July is short, as these documents always are. It is also the closest thing yet published to an institutional anatomy of Gulf resilience.

"The UAE economy has demonstrated significant resilience amid the geopolitical conflict in the Middle East," Bakhache says, and then does something more useful than praise: he itemises. "Sound fundamentals, ample policy buffers, advanced preparedness, and a swift policy response have contained the overall impact of the shock." Four causes, each nameable and datable. That is what lifts the statement above reassurance.

What the Fund Says Held

The statement credits "timely and well-targeted support measures" with helping to "preserve financial stability, safeguard essential supply chains" and "sustain market confidence". The projections underneath are more striking than the praise. After robust expansion in 2025, the Fund expects overall GDP to come in slightly lower this year, with the drag concentrated in non-hydrocarbon activity. It expects a rebound in the second half as exports recover, assuming gradual normalisation between the US and Iran. Growth then strengthens in 2027 as hydrocarbon production scales up. The fiscal balance stays in surplus on favourable oil revenues and conservative budgeting, and low public debt, in the statement's words, provides "ample fiscal space".

A war on the doorstep, the region's main export artery shut, and the institutional finding is: slightly lower. Shocks of this size are supposed to break something.

A Trillion-Dirham Backstop, Used Sparingly

The statement's "swift policy response" has a name and a date. On 17 March the board of the Central Bank of the UAE (CBUAE), chaired by Sheikh Mansour bin Zayed, approved its Financial Institution Resilience Package: enhanced access to reserve balances of up to 30 per cent of the cash reserve requirement, term liquidity in both dirhams and dollars, temporary relief on liquidity and stable funding ratios, release of the countercyclical and capital conservation buffers, flexibility to postpone loan classification for affected borrowers, and a plain instruction that banks keep financing their customers. The same 17 March release carried the collateral that made the promise credible: foreign exchange reserves above AED 1 trillion (USD 270 billion) and a monetary base cover ratio of 119 per cent.

Uptake tells its own story. By 8 May, facilities under the package totalled AED 6.2 billion across 65,379 beneficiaries, most of them individuals alongside 4,335 smaller firms and 485 corporates, according to central bank figures carried by state news agency WAM. Against a banking sector of AED 5.4 trillion that is a rounding error, which is the point: a backstop of that size works mainly by existing. Per the same figures, banking assets grew 2.1 per cent, loans 3.2 per cent and deposits 1.9 per cent between 1 March and 1 May. The financial sector did not merely hold through the war's opening months. It grew. And the relief reached into the retail and small-business layer of a credit system whose unusual depth CFI.co examined last November in Deem Finance: Driving Financial Inclusion and Digital Transformation in the UAE.

Oil That Never Saw the Strait

Rerouting was the other absorber. Crude that would have loaded inside the Gulf moved instead through the Habshan-Fujairah pipeline to the Gulf of Oman, a line whose capacity the International Energy Agency puts at up to 1.8 million barrels per day, per Al-Monitor's reporting in May. On 15 May Abu Dhabi's crown prince, Sheikh Khaled bin Mohamed, ordered construction of a second line to Fujairah accelerated. That project is expected to double export capacity there when it starts up in 2027. ADNOC's chief executive, Sultan Al Jaber, has described the closure's worldwide cost as "a shortage of 1 billion barrels of oil at the global level". Barrels that bypass the Strait have rarely been worth more.

The external accounts suggest the plumbing held. The CBUAE's balance of payments update of 6 July prompted a plain-spoken WAM headline: "UAE balance of payments is back in positive territory".

The war also reframed the UAE's oil politics. Membership of OPEC ended on 1 May, after 59 years. Quotas had held production near 3.4 million barrels per day, roughly 30 per cent below capacity, and the stated destination, The National reported, is 5 million barrels per day by 2027. It bears on the audit at one point: the IMF's 2027 rebound assumes hydrocarbon production scales up, and production is now unconstrained by quota.

Where the Shock Landed

The statement is specific about what softened. Heightened uncertainty weighed on tourism, transport and trade. Real estate activity moderated in the first half of the year after several years of strong growth. The effect varied by segment and location, AGBI reported, with prices generally at or above 2025 levels. Then the sentence that will follow the UAE into next year: "While the banking sector's exposure to real estate is contained, evolving market conditions warrant continued monitoring." Bakhache adds that "private sector credit growth is expected to moderate, reflecting a slowdown in non-hydrocarbon activity". Read the verbs. Contained, moderated, monitored. Nothing in this audit broke.

Replicable, up to a Point

The mission's implicit test is which of the four causes travel. The institutional parts do: surpluses banked in good years, conservative budgeting, buffers built in order to be released, a relief package designed before it was needed. Any Gulf treasury with fiscal room could assemble that kit, and several have the room. The structural parts do not travel. A coastline beyond the Strait cannot be legislated; Saudi Arabia has its own Red Sea outlet, but Kuwait, Qatar and Bahrain load almost entirely inside Hormuz. Neither can a diversification head-start, built over two decades and part of the regional shift from shipping goods to exporting knowledge that CFI.co traced in From Dubai Chocolate to AI: The Middle East in Transition. For a neighbouring finance ministry the division is stark: the fiscal half of this playbook can be adopted in a budget cycle, while the geographic and diversification half took the UAE twenty years and cannot be bought in one.

The document invites its own scepticism. A staff visit is not a full consultation; the statement carries no data tables, and the numbers arrive with the Article IV report later this year. The central projection leans on an assumption, gradual normalisation between the US and Iran, that no forecaster can underwrite; the mid-July resumption shows how quickly it can fail. Released capital buffers must eventually be rebuilt. And relief that postpones loan classification postpones knowledge as well as pain, which is one reason the Fund's own framing concedes elevated uncertainty and considerable risks in both directions.

The Consultation to Come

Three things to watch. Whether the property moderation stays within the banking system's capacity to absorb it, now formally the exposure under "continued monitoring". How, and how fast, the temporary relief is unwound, since a buffer only deserves the name if it is rebuilt. And what post-OPEC production does to the fiscal surplus on which the whole edifice rests. Neighbouring treasuries will read the full Article IV as a manual when it lands. The Fund did not write its statement as one, and the question it leaves open is the one that matters most in the region: whether the formula holds through the longer and hotter conflict that resumed while the auditors were still in the country.

Sources

1. IMF, "IMF Staff Concludes Visit to the United Arab Emirates" (concluding statement of the 7 to 16 July staff visit, mission chief Said Bakhache), 17 July 2026, https://www.imf.org/en/news/articles/2026/07/17/pr26250-united-arab-emirates-imf-staff-concludes-visit (direct fetch returned HTTP 403 to this agent; text triangulated via sources 2 to 6), accessed 18 July 2026.

2. Mirage News (full carry of source 1), "IMF Staff Wraps Up UAE Visit 17 July", 17 July 2026, https://www.miragenews.com/imf-staff-wraps-up-uae-visit-17-july-1712090/, accessed 18 July 2026.

3. UAE Today Blog (WAM carry), "IMF Confirms UAE Economy's Exceptional Resilience, Proactive Readiness, Continued Financial Sector Growth", 17 July 2026, https://blog.uaetoday.com/imf-confirms-uae-economys-exceptional-resilience-proactive-readiness-continued-financial-sector-growth/, accessed 18 July 2026.

4. ARN News Centre (WAM carry), "IMF praises UAE economy's resilience, proactive readiness", 17 July 2026, https://www.arnnewscentre.ae/en/news/business/imf-praises-uae-economys-resilience-proactive-readiness/, accessed 18 July 2026.

5. Gulf Today, "UAE economy demonstrates notable resilience during Mideast conflict: IMF", 17 July 2026, https://www.gulftoday.ae/business/2026/07/17/uae-economy-demonstrates-notable-resilience-during-mideast-conflict-imf (fetch returned HTTP 403; headline and carried text matched the WAM copy via search index), accessed 18 July 2026.

6. AGBI (Valentina Pasquali), "Economy holds firm but IMF warns of UAE property slowdown", 17 July 2026, https://www.agbi.com/economy/2026/07/economy-holds-firm-but-imf-warns-of-uae-property-slowdown/, accessed 18 July 2026.

7. Central Bank of the UAE, press release, "CBUAE Board Reviews Strength and Resilience of the UAE's Financial System and Banking Sector and Approves a Proactive Financial Institution Resilience Package Backed by CBUAE's Assets of AED 1 Trillion", 17 March 2026, https://www.centralbank.ae/media/tqppj12e/cbuae-board-reviews-strength-and-resilience-of-the-uae-s-financial-system-and-banking-sector-approves-proactive-financial-institution-resilience-package-en.pdf (primary; full PDF read), accessed 18 July 2026.

8. ARN News Centre (WAM carry), "UAE Central Bank support package reaches AED 6.2 billion", 8 May 2026, https://www.arnnewscentre.ae/news/business/uae-central-bank-support-package-reaches-aed-6-2-billion/, accessed 18 July 2026. Corroborating same-day carries located: Sharjah24, Gulf Today, Zawya ("reaches $1.69bln"), economymiddleeast.com.

9. Al-Monitor, "UAE to fast-track construction of second oil pipeline, bypassing Hormuz: What to know", May 2026, https://www.al-monitor.com/originals/2026/05/uae-fast-track-construction-second-oil-pipeline-bypassing-hormuz-what-know, accessed 18 July 2026.

10. The National, "UAE announces it will leave Opec", 28 April 2026, https://www.thenationalnews.com/business/energy/2026/04/28/uae-announces-it-will-leave-opec/, accessed 18 July 2026. Corroborating headlines located but not fetched: Enerdata, Al Jazeera (28 April 2026).

11. Central Bank of the UAE, "Developments in the UAE Balance of Payments – July 2026", published 6 July 2026, https://www.centralbank.ae/en/research-and-statistics/latest-statistics/balance-of-payments-statistics/developments-in-the-uae-balance-of-payments-july-2026/ (page blocked to this agent; existence, title and date verified via search index). WAM carry headline: "UAE balance of payments is back in positive territory", https://www.wam.ae/en/article/hsyht1j3-uae-balance-payments-back-positive-territory (fetch failed with a parse error; headline verified via search index), accessed 18 July 2026.

12. CFI.co, "Deem Finance: Driving Financial Inclusion and Digital Transformation in the UAE", 10 November 2025, https://cfi.co/finance/2025/11/deem-finance-driving-financial-inclusion-and-digital-transformation-in-the-uae/ (live, title-matched), accessed 18 July 2026.

13. CFI.co, "From Dubai Chocolate to AI: The Middle East in Transition", 3 September 2025, https://cfi.co/middleeast/2025/09/from-dubai-chocolate-to-ai-the-middle-east-in-transition/ (live, title-matched), accessed 18 July 2026.

14. CNN live coverage, "US resumes strikes while Iran says it struck two tankers in Strait of Hormuz", 13 July 2026, https://www.cnn.com/2026/07/13/world/live-news/iran-war-trump, accessed 18 July 2026.

15. NPR, "The U.S. strikes Iran after Trump announces a renewed blockade and tolls in Hormuz", 13 July 2026, https://www.npr.org/2026/07/13/nx-s1-5891746/us-iran-strait-of-hormuz-updates, accessed 18 July 2026. Corroborating: Al Jazeera, "US, Iran exchange attacks around Strait of Hormuz", 13 July 2026.

16. Bloomberg, "Trump Says Iran Violated Ceasefire With Hormuz Drone Attack", 26 June 2026, https://www.bloomberg.com/news/articles/2026-06-26/trump-says-iran-violated-ceasefire-with-hormuz-drone-attack-mqv49tcx, accessed 18 July 2026. Corroborating: PBS News, "U.S. strikes Iran in response to drone attack on cargo ship that Trump says violated ceasefire"; NPR, 27 June 2026; ABC News timeline of the US-Iran ceasefire and MOU breakdown.