Economic growth in the Gulf Cooperation Council (GCC) countries is strengthening in 2025, according to the latest Gulf Economic Update (GEU) released by the World Bank. The report forecasts that the United Arab Emirates will see its economy expand by 4.8%, Saudi Arabia by 3.8%, Bahrain by 3.5%, Oman by 3.1%, Qatar by 2.8%, and Kuwait by 2.7%. The update attributes this momentum to ongoing structural reforms and rapid advances in digital innovation.
The report, titled "The Gulf’s Digital Transformation: A Powerful Engine for Economic Diversification," examines economic diversification, macroeconomic stability, and digital transformation efforts across the region amid global uncertainty and fluctuating oil markets. It notes that while hydrocarbons remain central to fiscal strategies and development plans, recent trends indicate progress toward reducing dependence on oil revenues. Non-oil exports continue to be modest, with chemicals as a leading sector outside of hydrocarbons.
A key focus of the report is the acceleration of digital transformation and artificial intelligence (AI) adoption across GCC countries. All member states now have advanced telecommunications infrastructure, including over 90% coverage for 5G networks, high-speed internet access, and affordable connectivity options. Investments in data centers and high-performance computing are increasing AI readiness, with Saudi Arabia and the UAE identified as regional leaders due to strong startup ecosystems, venture funding activity, and government integration of generative AI technologies.
"Diversification and digital transformation are no longer optional. They are essential for long-term stability and prosperity. Strategic investments in non-oil sectors and innovation will be critical to sustaining growth and stability," said Safaa El Tayeb El Kogali, World Bank Division Director for the Gulf Cooperation Council.
"The GCC’s digital leap is remarkable. With robust infrastructure and growing compute power, skills and competencies in Artificial intelligence (AI) capabilities, the region is well-placed to lead in innovation, provided we address labor and environmental challenges proactively," El Kogali added.
The report also highlights that women’s participation in STEM fields exceeds global averages in the GCC region, supporting competitiveness in digital industries. To further promote diversification benefits from digital transformation, recommendations include helping small- and medium-sized enterprises adopt AI solutions; strengthening innovation ecosystems; implementing reskilling programs; fostering regional cooperation on digital infrastructure; and establishing AI centers of excellence to create a unified digital market across Middle East, North Africa, Afghanistan, and Pakistan.
Country-specific outlooks included:
- Bahrain: Growth remains strong due to financial services and tourism expansion but fiscal pressures persist because of high deficits.
- Kuwait: After recent contractions tied to regional instability and low oil prices, growth returns as higher oil exports support recovery.
- Oman: Non-hydrocarbon sectors are increasingly driving growth as diversification accelerates.
- Qatar: Non-oil sectors show resilience despite lower hydrocarbon prices; LNG expansion projects are expected to boost output.
- Saudi Arabia: Both oil and non-oil sectors are contributing to economic momentum; Vision 2030 reforms aim to attract more investment despite a rising debt-to-GDP ratio.
- United Arab Emirates: Maintains balanced growth between oil and non-oil sectors while leading efforts at export base diversification.