2026 Regional Economic Forecasts

Property rates have come under pressure after a duration of strong growth, with current data from the Dubai Land Department showing a drop in home loan transactions and cash sales. We believe the danger of a long lasting migrant outflow and a serious slump in the real estate sector is low.

As a long lasting US-Iran deal takes shape, the fallout from the dispute has actually tightened regional monetary conditions, exposing vulnerabilities through capital outflows, broader bond spreads, and weaker investor sentiment. Many GCC sovereigns bring reasonably little debt and funding dangers are therefore limited in the UAE, the main bank's liquidity management has actually relieved instant concerns.

That said, Bahrain has actually had the ability to count on assistance from neighbours, including 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 region since the war began. High-frequency fiscal data highlight the strain on local public finances from the conflict.

ANSR July GCC PRs 50DR+

Key Capital Shifts for the Future

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

GCC inflation characteristics remain irregular, with food prices the main source of upward pressure and inflation in this classification strengthening in Kuwait, Oman and Qatar. By contrast, food inflation stays fairly controlled in Saudi Arabia, likely reflecting the mitigating impact of its bigger domestic food production base and greater supply-chain resilience.

We continue to see cost pressures as largely temporal rather than indicative of a continual inflationary cycle. Appropriately, we anticipate typical inflation to alleviate to 2.1% y/y in 2027 as short-term supply-side pressures dissipate. With near-term inflation elevated and transit through the Strait likely set to resume gradually, we expect the United States Federal Reserve to keep rates of interest on hold until December, and local rate policies to follow fit.

We anticipate Iran's GDP to shrink by 10.8% this year (we forecast a 9.4% contraction three months ago). Oil production and exports, which offer important earnings and FX inflows, have been cut by the US naval blockade, while non-oil activity has actually been seriously struck. In Iraq, oil exports have collapsed to a drip and we're forecasting GDP to agreement by around 22% this year, with a sharp 33% rebound in 2027 as oil exports normalise.

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

Future-Proofing GCC Portfolios against 2026 Shifts

The World Bank has slashed its 2026 development forecast for Middle East economies, saying total GDP development in the region is expected to slow from an estimated 3.6% in January to 1.8% for 2026. The closure of the strategic Strait of Hormuz, and damage of energy and public infrastructure, had interfered with markets, increased monetary volatility, and compromised the 2026 development outlook, the World Bank Group said in its Economic Update for the Middle East, North Africa, Afghanistan and Pakistan.

The April 2026 World Bank's Macro Poverty Outlook forecasts that the area's aggregate (excluding the Iran) GDP growth will slow down to 1.8 percent in 2026, down from 4.0 percent estimated for 2025. The 2026 forecast has actually been downgraded by 2.4 portion points because the January projections, showing the negative results of the ongoing 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, keeping in mind that Saudi Arabia's outlook remains the strongest amongst Gulf economies. United Arab Emirates: Development forecast for the UAE has actually fallen by 2.7 percentage points because January.

Qatar: Notably, development projection for the Qatari economy has seen a sharp decrease of 11.0 percentage points considering that January. The economy is now anticipated to record a contraction of 5.7%, down from an approximated development of 5.3%, due to extreme blockage to liquefied gas supplies. Qatar is a crucial gamer in the global energy market, with a global market share of melted gas (LNG) products varying between 20% and 21%.

Kuwait relies completely (100%) on the Strait of Hormuz to export its unrefined oil and derivatives. Closing the strait would suggest a complete shutdown of the nation's financial lifeline, immediately stopping revenue inflows to the state budget. Bahrain: Development projection for Bahrain's economy has actually declined by 1.8 percentage points considering that January.