2026 GCC Economic Forecasts

Home rates have come under pressure after a duration of strong growth, with recent information from the Dubai Land Department showing a drop in home loan deals and money sales. We believe the danger of a long lasting migrant outflow and an extreme downturn in the genuine estate sector is low.

As a lasting US-Iran offer takes shape, the fallout from the dispute has tightened local financial conditions, exposing vulnerabilities through capital outflows, broader bond spreads, and weaker investor belief. The majority of GCC sovereigns bring reasonably little financial obligation and funding risks are for that reason restricted in the UAE, the reserve bank's liquidity management has actually relieved instant concerns.

That stated, Bahrain has been able to rely on support from neighbours, consisting of Saudi Arabia and the UAE, and it successfully raised $1bn from an oversubscribed sovereign bond sale this month, marking the very first offering from the area considering that the war started. High-frequency fiscal data highlight the stress on local public financial resources from the dispute.

ANSR July GCC PRs 50DR+

Key Industrial Shifts in 2026

In Saudi Arabia, the spending plan deficit more than doubled to SAR125.7 bn, or about 9% of GDP in Q1, driven by a decrease in oil income and a surge in spending, especially on aids, showing contingency expenses tied to the local environment and an acceleration of Vision 2030 spending. In Qatar, the crisis brought oil and gas income to a stop, swelling the budget plan deficit to the biggest considering that 2017.

GCC inflation dynamics remain uneven, with food rates the main source of upward pressure and inflation in this classification conditioning in Kuwait, Oman and Qatar. By contrast, food inflation remains relatively suppressed in Saudi Arabia, likely showing the mitigating impact of its larger domestic food production base and greater supply-chain durability.

We continue to see rate pressures as mainly transitory instead of indicative of a sustained inflationary cycle. Accordingly, we anticipate typical inflation to reduce to 2.1% y/y in 2027 as momentary supply-side pressures dissipate. With near-term inflation raised and transit through the Strait likely set to resume slowly, we anticipate the United States Federal Reserve to keep interest rates on hold up until December, and regional rate policies to do the same.

We expect Iran's GDP to diminish by 10.8% this year (we anticipate a 9.4% contraction 3 months ago). Oil production and exports, which offer necessary revenue and FX inflows, have been reduced by the US marine blockade, while non-oil activity has actually been severely struck. In Iraq, oil exports have collapsed to a trickle and we're anticipating GDP to contract by around 22% this year, with a sharp 33% rebound in 2027 as oil exports normalise.

By contrast, Syria continues to reintegrate into the worldwide economy after more than a decade of civil war. We anticipate GDP growth to typical 9.6% over 2026-2027, supported by renewed investment, especially in banking and energy, monetary reforms, and the steady reopening of regional trade links.

Why Economic Diversification Can Shape GCC Markets

The World Bank has actually slashed its 2026 growth projection for Middle East economies, saying overall GDP growth in the area is expected to slow from an estimated 3.6% in January to 1.8% for 2026. The closure of the tactical Strait of Hormuz, and destruction of energy and public infrastructure, had interfered with markets, increased monetary volatility, and weakened the 2026 growth outlook, the World Bank Group stated in its Economic Update for the Middle East, North Africa, Afghanistan and Pakistan.

The April 2026 World Bank's Macro Hardship Outlook anticipates that the area's aggregate (omitting the Iran) GDP development will decrease to 1.8 percent in 2026, down from 4.0 percent estimated for 2025. The 2026 projection has actually been downgraded by 2.4 portion points considering that the January projections, reflecting the unfavorable results of the continuous conflict.

Saudi Arabia: Forecast was devalued by 1.2 percentage points since January. Development is now expected to slow from 4.3% in 2025 to 3.1% in 2026, noting that Saudi Arabia's outlook stays the greatest amongst Gulf economies. United Arab Emirates: Development projection for the UAE has actually fallen by 2.7 percentage points considering that January.

Qatar: Significantly, growth forecast for the Qatari economy has actually seen a sharp decrease of 11.0 percentage points because January. The economy is now anticipated to tape a contraction of 5.7%, below an approximated growth of 5.3%, due to severe obstruction to melted gas materials. Qatar is an essential player in the worldwide energy market, with a global market share of liquefied natural gas (LNG) materials ranging between 20% and 21%.

Kuwait relies totally (100%) on the Strait of Hormuz to export its petroleum and derivatives. Closing the strait would indicate a total shutdown of the country's financial lifeline, instantly halting revenue inflows to the state budget. Bahrain: Growth forecast for Bahrain's economy has actually decreased by 1.8 percentage points given that January.