Future GCC Financial Outlook

Dangers are slanted to the disadvantage. In the occasion of a prolonged conflict, the present impacts on the region will be compoundedthrough raised energy and food prices, declining trade, tourism and remittances, increased financial pressures, and displacement. "The present crisis is a plain suggestion of the work ahead for the region: not only to weather shocks, however to rebuild more durable economies with stronger macroeconomic fundamentals, innovate and improve governance, invest in facilities, and increase employment-creating sectors," stated.

With peace and the right action, nations can build the institutions, abilities and competitive sectors that create opportunities for people." With this long-term vision in mind, the report takes a close look at the area's potential for commercial policy government actions to increase strategic service activity as a motorist of financial growth and job production.

ANSR July GCC PRs 50DR+

Governments in the region have actually adopted commercial policy at a high rate in the last years, frequently through sovereign wealth funds and state-owned enterprises, however the results have been mixed. The report highlights the important need for strong organizations and mindful targeting of policies. "As countries deal with the heavy toll of the present conflict, it is necessary to likewise not lose sight of the work required for lasting peace and prosperity," stated.

Driving Non-Oil Growth via Strategic Diversification

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly economic projection for the area prepared directly for the financing profession. The GCC economy faces a marked contraction this year pending information of the US-Iran agreement to end the war. We anticipate energy circulations, tourist and investor belief to slowly normalise as war interruptions subside.

ANSR July GCC PRs 50DR+

The interim contract in between the United States and Iran is a considerable action towards reaching a full-blown offer. A complete go back to normality in the Strait of Hormuz will likely take time, but the risk of a recession-inducing oil cost spike has actually decreased. Worldwide GDP is expected to grow by 2.4% this year, 0.2 ppt less than we forecasted 3 months ago, and 3.1% in 2027.

We anticipate a 4.1% contraction in Middle East GDP this year (versus predicted 3.6% expansion before the war), greater than the decrease in the very first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stick out as the hardest struck, owing to their inability to prevent the interruption to local shipping, war-driven infrastructure damage and tourism losses.

Our 2026 outlook for the GCC is weaker than 3 months back, with GDP projection to agreement by 2.4% compared to a 0.2% decline projected formerly. We anticipate Oman and Saudi Arabia to be the least negatively impacted by the fallout from the conflict, with both economies continuing to broaden this year.

The financial damage sustained in the last couple of months is substantial. Saudi GDP data for Q1 revealed growth slowed to 3% y/y, with non-oil activities broadening by 2.9%, the weakest rate because the Covid pandemic. On a seasonally changed basis, GDP contracted 1.2% q/q, driven by a 6.8% fall in oil activities as the Strait of Hormuz disturbance hit late in the quarter.

Key Foreign Investment Prospects for the GCC Region

Aside from Oman, all GCC producers along with Iran and Iraq have suffered substantial oil and gas production losses because the start of the conflict. May data show local production nearly cut in half from pre-war levels, with the decrease deepening relative to March and April. Rerouting efforts, including by Saudi Arabia through the East-West Pipeline and the UAE through the Habshan-Fujairah pipeline, have actually assisted prevent an even bigger plunge in output.

ANSR July GCC PRs 50DR+

We anticipate GCC oil sector output to agreement by 14.5% this year, which will mark the steepest decline in several years. We then expect a 23.5% rebound next year, driven mainly by normalisation from a badly depressed base. Oil costs have been volatile, easing listed below $85 per barrel as the interim contract was revealed.

In the medium term, we expect oil prices to be somewhat lower than our pre-war standard, as the UAE's departure from OPEC+ permits a steady increase in its output towards the 5mn barrel each day production target when trade normalises. Versus this backdrop, the UAE will speed up the construction of a brand-new West-East pipeline that ought to double the capability of export through Fujairah.

The May PMI studies reported output growth reaching its strongest level in three months, driven mostly by improved domestic demand. Nevertheless, they stay below long-run averages, with weak export orders and cost pressures from higher product and transportation expenses are a typical style. In general, we anticipate a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% growth pre-war) and a progressive recovery over the rest of the years.