Key Economic Diversification for the Future

Home rates have actually come under pressure after a period of strong growth, with recent information from the Dubai Land Department revealing a drop in home loan transactions and cash sales. We believe the danger of a lasting migrant outflow and a serious decline in the genuine estate sector is low.

As an enduring US-Iran deal takes shape, the fallout from the conflict has tightened local monetary conditions, exposing vulnerabilities through capital outflows, larger bond spreads, and weaker investor belief. A lot of GCC sovereigns carry reasonably little financial obligation and funding dangers are therefore restricted in the UAE, the main bank's liquidity management has actually relieved instant concerns.

That said, Bahrain has had the ability to rely on assistance from neighbours, consisting of 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 area because the war started. High-frequency fiscal data underscore the stress on regional public financial resources from the dispute.

ANSR July GCC PRs 50DR+

Driving Economic Success through Strategic Diversification

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 earnings and a rise in costs, especially on subsidies, reflecting contingency outlays tied to the local environment and an acceleration of Vision 2030 spending. In Qatar, the crisis brought oil and gas earnings to a stop, swelling the deficit spending to the largest considering that 2017.

GCC inflation dynamics remain uneven, with food rates the main source of upward pressure and inflation in this category fortifying in Kuwait, Oman and Qatar. By contrast, food inflation remains fairly controlled in Saudi Arabia, likely showing the mitigating effect of its larger domestic food production base and greater supply-chain strength.

We continue to view price pressures as largely temporal instead of indicative of a sustained inflationary cycle. Accordingly, 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 anticipate the US Federal Reserve to keep interest rates on hold up until December, and regional rate policies to do the same.

We anticipate Iran's GDP to diminish by 10.8% this year (we anticipate a 9.4% contraction three months ago). Oil production and exports, which provide vital income and FX inflows, have been curtailed by the United States marine blockade, while non-oil activity has been seriously struck. In Iraq, oil exports have collapsed to a trickle and we're forecasting GDP to contract 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 expect GDP development to typical 9.6% over 2026-2027, supported by restored investment, particularly in banking and energy, monetary reforms, and the progressive reopening of regional trade links.

Future Middle Eastern Financial Forecasts

The World Bank has slashed its 2026 development projection for Middle East economies, saying total GDP development in the area 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 actually disrupted markets, increased financial volatility, and compromised 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 Poverty Outlook forecasts that the region's aggregate (excluding the Iran) GDP growth will decelerate to 1.8 percent in 2026, below 4.0 percent approximated for 2025. The 2026 forecast has actually been downgraded by 2.4 percentage points because the January projections, reflecting the negative results of the continuous dispute.

Saudi Arabia: Forecast was reduced by 1.2 portion points considering that January. Development is now anticipated 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: Development forecast for the UAE has actually fallen by 2.7 portion points since January.

Qatar: Significantly, development forecast for the Qatari economy has seen a sharp decrease of 11.0 percentage points since January. The economy is now anticipated to tape a contraction of 5.7%, below an estimated development of 5.3%, due to serious blockage to liquefied gas supplies. Qatar is an essential player in the global energy market, with a global market share of liquefied natural gas (LNG) supplies ranging between 20% and 21%.

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