2026 GCC Economic Forecasts

Home costs have come under pressure after a period of strong growth, with current information from the Dubai Land Department revealing a drop in home mortgage transactions and money sales. However, we believe the threat of an enduring migrant outflow and an extreme downturn in the genuine estate sector is low.

As a long lasting US-Iran deal takes shape, the fallout from the conflict has tightened local financial conditions, exposing vulnerabilities through capital outflows, wider bond spreads, and weaker investor sentiment. A lot of GCC sovereigns bring reasonably little debt and funding dangers are for that reason limited in the UAE, the central bank's liquidity management has reduced instant issues.

That stated, Bahrain has been able to count on assistance from neighbours, consisting of 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 because the war started. High-frequency fiscal information underscore the stress on regional public finances from the conflict.

ANSR July GCC PRs 50DR+

Future-Proofing Middle East Portfolios for 2026 Shifts

In Saudi Arabia, the deficit spending more than doubled to SAR125.7 bn, or about 9% of GDP in Q1, driven by a decrease in oil profits and a surge in costs, especially on aids, showing contingency outlays tied to the regional environment and an acceleration of Vision 2030 costs. In Qatar, the crisis brought oil and gas income to a stop, swelling the deficit spending to the largest because 2017.

GCC inflation dynamics remain uneven, with food prices the primary source of upward pressure and inflation in this category conditioning in Kuwait, Oman and Qatar. By contrast, food inflation remains relatively suppressed in Saudi Arabia, likely reflecting the mitigating result of its bigger domestic food production base and greater supply-chain resilience.

We continue to view cost pressures as mostly temporal rather than indicative of a continual inflationary cycle. Appropriately, we expect typical inflation to alleviate to 2.1% y/y in 2027 as short-term supply-side pressures dissipate. With near-term inflation raised and transit through the Strait most likely set to resume slowly, we expect the United States Federal Reserve to keep rate of interest on hold until December, and local rate policies to do the same.

We anticipate Iran's GDP to shrink by 10.8% this year (we anticipate a 9.4% contraction three months ago). Oil production and exports, which provide vital earnings and FX inflows, have actually been cut by the United States naval blockade, while non-oil activity has actually been badly hit. In Iraq, oil exports have collapsed to a trickle 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 worldwide economy after more than a years of civil war. We prepare for GDP growth to average 9.6% over 2026-2027, supported by renewed investment, especially in banking and energy, financial reforms, and the gradual resuming of regional trade links.

Future-Proofing Middle East Investments against 2026 Trends

The World Bank has actually slashed its 2026 growth projection for Middle East economies, stating general GDP growth in the region 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 disrupted markets, increased monetary volatility, and damaged the 2026 growth 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 Hardship Outlook forecasts that the area's aggregate (omitting the Iran) GDP growth will slow down to 1.8 percent in 2026, below 4.0 percent estimated for 2025. The 2026 forecast has actually been reduced by 2.4 percentage points given that the January forecasts, showing the negative impacts of the continuous dispute.

Saudi Arabia: Forecast was downgraded by 1.2 percentage points since January. Growth 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: Growth projection for the UAE has fallen by 2.7 portion points given that January.

Qatar: Significantly, growth forecast for the Qatari economy has actually seen a sharp decline of 11.0 percentage points since January. The economy is now anticipated to tape a contraction of 5.7%, below an approximated development of 5.3%, due to extreme obstruction to melted gas products. Qatar is a key gamer in the worldwide energy market, with a worldwide market share of liquefied gas (LNG) products ranging between 20% and 21%.

Kuwait relies completely (100%) on the Strait of Hormuz to export its crude oil and derivatives. Closing the strait would imply a total shutdown of the nation's monetary lifeline, immediately halting revenue inflows to the state budget. Bahrain: Development projection for Bahrain's economy has actually decreased by 1.8 portion points since January.