The fresh projection marked a sharp downgrade from its October projection of 4% growth, which comes as the region grapples with geopolitical tensions, softer external demand, and oil market volatility.

"Uncertainty could impact the real economy, consumption, investment, all these elements led to a softening of our projections," Jihad Azour, the IMF's Director for the Middle East and Central Asia department, told Reuters in an interview.

"The direct impact of the tariff measures is limited because the integration in terms of trade between the region and the United States is limited."

The IMF also pointed to a gradual recovery in oil production, protracted regional conflicts, and delayed structural reforms, particularly in Egypt, in its latest Regional Economic Outlook report released in Dubai.

"The ongoing conflicts in the MENA region have inflicted profound humanitarian costs and left deep economic scars," it said in the report, adding that the impact has been severe for the region's oil-importing economies.

--Reuters--