Upcoming GCC Financial Outlook

Threats are tilted to the disadvantage. In case of a prolonged conflict, the current effect on the area will be compoundedthrough raised energy and food costs, declining trade, tourist and remittances, increased fiscal pressures, and displacement. "The current crisis is a plain suggestion of the work ahead for the region: not only to weather shocks, however to reconstruct more durable economies with more powerful macroeconomic basics, innovate and enhance governance, buy infrastructure, and increase employment-creating sectors," said.

With peace and the best action, countries can construct the organizations, capabilities and competitive sectors that develop opportunities for people." With this long-lasting vision in mind, the report takes a close look at the area's potential for industrial policy government actions to increase strategic organization activity as a chauffeur of financial development and task creation.

ANSR July GCC PRs 50DR+

Federal governments in the area have actually embraced commercial policy at a high rate in the last decade, frequently through sovereign wealth funds and state-owned enterprises, but the outcomes have actually been mixed. The report highlights the important need for strong institutions and cautious targeting of policies. "As countries face the heavy toll of the present conflict, it is very important to also not forget the work needed for lasting peace and prosperity," said.

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Q2 2026: The ICAEW Economic Update Middle East, is a quarterly economic projection for the region prepared straight for the financing occupation. The GCC economy deals with a significant contraction this year pending details of the US-Iran contract to end the war. We anticipate energy circulations, tourist and investor sentiment to gradually normalise as war disturbances subside.

ANSR July GCC PRs 50DR+

The interim arrangement between the United States and Iran is a significant action towards reaching a full-blown offer. A complete go back to normality in the Strait of Hormuz will likely require time, but the threat of a recession-inducing oil price spike has actually declined. Worldwide GDP is anticipated to grow by 2.4% this year, 0.2 ppt less than we predicted 3 months ago, and 3.1% in 2027.

We anticipate a 4.1% contraction in Middle East GDP this year (versus projected 3.6% expansion before the war), higher than the decrease in the very first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stand out as the hardest hit, owing to their inability to avoid the disturbance to regional shipping, war-driven infrastructure damage and tourist losses.

Our 2026 outlook for the GCC is weaker than 3 months earlier, with GDP projection to contract by 2.4% compared to a 0.2% decline projected previously. We anticipate Oman and Saudi Arabia to be the least adversely impacted by the fallout from the dispute, with both economies continuing to expand this year.

The economic damage incurred 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 pace given that 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 disruption hit late in the quarter.

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Aside from Oman, all GCC manufacturers as well as Iran and Iraq have actually suffered substantial oil and gas production losses considering that the start of the dispute. May information show regional production nearly halved from pre-war levels, with the decrease deepening relative to March and April. Rerouting efforts, consisting of 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+

Nevertheless, we anticipate GCC oil sector output to contract by 14.5% this year, which will mark the steepest decrease in several decades. We then expect a 23.5% rebound next year, driven mainly by normalisation from a seriously depressed base. On the other hand, oil prices have actually been unpredictable, relieving below $85 per barrel as the interim arrangement was revealed.

In the medium term, we expect oil prices to be slightly lower than our pre-war baseline, as the UAE's departure from OPEC+ enables a steady boost in its output towards the 5mn barrel daily production target as soon as trade normalises. Against this background, the UAE will speed up the building of a brand-new West-East pipeline that should double the capability of export through Fujairah.

The May PMI surveys reported output growth reaching its greatest level in three months, driven mostly by enhanced domestic demand. Nevertheless, they stay below long-run averages, with weak export orders and cost pressures from higher material and transport costs are a common style. Overall, we expect a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% growth pre-war) and a gradual healing over the remainder of the decade.