Economic growth in the Gulf Cooperation Council (GCC) is forecasted to rise in the medium term, with projections indicating a 3.2% increase in 2025 and a further rise to 4.50% in 2026. This anticipated growth is attributed to the expected rollback of OPEC+ oil production cuts and robust expansion within non-oil sectors.
The latest Gulf Economic Update (GEU) reports that regional growth improved from 0.3% in 2023 to 1.7% in 2024, with the non-hydrocarbon sector showing resilience by expanding at a rate of 3.7%. This expansion was largely driven by private consumption, investment, and structural reforms across GCC countries.
Despite these positive indicators, global trade uncertainty poses challenges as a global economic slowdown remains a significant risk for the region. To counteract these risks, GCC nations are encouraged to accelerate economic diversification reforms and strengthen regional trade networks.
"The resilience of GCC countries in navigating global uncertainties while advancing economic diversification underscores their strong commitment to long-term prosperity,” said Safaa El Tayeb El-Kogali, Division Director for the GCC countries at the World Bank. "Strategic fiscal policies, targeted investments, and a strong focus on innovation, entrepreneurship, and job creation for youth are essential to sustaining growth and stability."
The report titled "Smart Spending, Stronger Outcomes: Fiscal Policy for a Thriving GCC" examines how fiscal policy can ensure macroeconomic stabilization and encourage growth amid fluctuating oil prices that strain budget balances across several countries in the region.
Findings indicate that government spending has effectively stabilized economies during recessions within the GCC region. A one-unit increase in fiscal spending can boost non-hydrocarbon output by between 0.1-0.45 units. Additionally, government investment has shown marginal impact on non-hydrocarbon output—resulting in a potential output change of just 0.07 percent per percentage point increase.
Oman's journey toward fiscal consolidation is highlighted as an example of effective reform and responsible management amidst oil dependency challenges. The country’s Medium-Term Fiscal Plan (2020-2024) introduced wide-ranging reforms aimed at diversifying revenue sources and improving expenditure efficiency.
Country-specific outlooks provide further insights:
- **Bahrain**: Growth is predicted to stabilize at 3.5% in 2025 due to refinery upgrades and robust non-hydrocarbon sector performance.
- **Kuwait**: Expected recovery with economic growth reaching 2.2% in 2025 after consecutive years of decline.
- **Oman**: Anticipated gradual acceleration of growth reaching up to 4% by 2027 driven by increased oil production.
- **Qatar**: Projected stable growth at first before accelerating due to LNG capacity expansion.
- **Saudi Arabia**: Continued recovery with projected increases up until an average of 4.6% over two years starting from late next year.
- **United Arab Emirates**: Predicted consistent upward trend supported primarily through non-oil sector developments.
This edition's cutoff date for data was June 1st this year according GEU documentation.