2026 Regional Economic Projections

Home prices have actually come under pressure after a duration of strong development, with current data from the Dubai Land Department showing a drop in mortgage deals and cash sales. Nonetheless, we think the risk of a long lasting migrant outflow and a severe decline in the property sector is low.

As a long lasting US-Iran deal takes shape, the fallout from the conflict has actually tightened up local monetary conditions, exposing vulnerabilities through capital outflows, broader bond spreads, and weaker financier sentiment. A lot of GCC sovereigns carry relatively little debt and financing risks are for that reason restricted in the UAE, the reserve bank's liquidity management has actually eased immediate concerns.

That stated, Bahrain has actually been able to count on assistance from neighbours, including Saudi Arabia and the UAE, and it effectively raised $1bn from an oversubscribed sovereign bond sale this month, marking the first offering from the region since the war began. High-frequency fiscal information underscore the stress on regional public finances from the conflict.

ANSR July GCC PRs 50DR+

Analyzing GCC Market Resilience in 2026

In Saudi Arabia, the deficit spending more than doubled to SAR125.7 bn, or about 9% of GDP in Q1, driven by a decline in oil revenue and a rise in spending, especially on subsidies, showing contingency outlays tied to the local environment and a velocity of Vision 2030 costs. In Qatar, the crisis brought oil and gas income to a stop, swelling the budget plan deficit to the largest given that 2017.

GCC inflation dynamics remain uneven, with food prices the primary source of upward pressure and inflation in this classification conditioning in Kuwait, Oman and Qatar. By contrast, food inflation stays reasonably subdued in Saudi Arabia, most likely reflecting the mitigating result of its bigger domestic food production base and higher supply-chain resilience.

We continue to view cost pressures as largely transitory rather than indicative of a sustained inflationary cycle. Accordingly, we expect 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 most likely set to resume gradually, we anticipate the United States Federal Reserve to keep rates of interest on hold until December, and local rate policies to do the same.

We expect Iran's GDP to diminish by 10.8% this year (we forecast a 9.4% contraction 3 months ago). Oil production and exports, which offer important earnings and FX inflows, have actually been cut by the US marine blockade, while non-oil activity has been badly struck. In Iraq, oil exports have actually collapsed to a drip and we're anticipating 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 years of civil war. We prepare for GDP growth to typical 9.6% over 2026-2027, supported by renewed financial investment, especially in banking and energy, financial reforms, and the progressive reopening of local trade links.

Advancing Industrial Growth via Global Diversification

The World Bank has actually slashed its 2026 growth forecast for Middle East economies, stating general 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 destruction of energy and public facilities, had disrupted markets, increased financial volatility, and damaged the 2026 development 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 forecasts that the area's aggregate (leaving out the Iran) GDP growth will slow down to 1.8 percent in 2026, below 4.0 percent approximated for 2025. The 2026 forecast has actually been reduced by 2.4 percentage points because the January projections, showing the negative impacts of the continuous conflict.

Saudi Arabia: Projection was downgraded by 1.2 portion points given that January. Growth is now anticipated to slow from 4.3% in 2025 to 3.1% in 2026, keeping in mind that Saudi Arabia's outlook stays the strongest among Gulf economies. United Arab Emirates: Development projection for the UAE has actually fallen by 2.7 percentage points because January.

Qatar: Notably, development forecast for the Qatari economy has seen a sharp decline of 11.0 portion points given that January. The economy is now anticipated to tape-record a contraction of 5.7%, below an approximated growth of 5.3%, due to severe obstruction to melted gas products. Qatar is an essential gamer in the worldwide energy market, with an international market share of melted gas (LNG) supplies ranging in between 20% and 21%.

Kuwait relies totally (100%) on the Strait of Hormuz to export its petroleum and derivatives. Closing the strait would suggest a complete shutdown of the country's financial lifeline, right away halting earnings inflows to the state spending plan. Bahrain: Development projection for Bahrain's economy has actually declined by 1.8 percentage points considering that January.