17/04/2026 08:10 AST
Growth across the GCC economies is expected to moderate in 2026 as geopolitical tensions and disruptions to energy trade routes weigh on the wider Middle East and North Africa (Mena) region, but forecasts by the International Monetary Fund and other global institutions suggest the bloc's fundamentals remain strong enough to support a recovery path over the medium term.
In its latest World Economic Outlook, the IMF cut Mena's real GDP growth forecast for this year to 1.1 per cent - a downward revision of 2.8 percentage points from its January estimate - reflecting the economic fallout from the US-Iran conflict and supply disruptions linked to the Strait of Hormuz, a key artery for global energy trade.
Despite the downgrade, the GCC's diversified policy frameworks, infrastructure investment pipelines and strong fiscal buffers are expected to cushion the impact compared with several other regional economies.
Saudi Arabia, the region's largest economy, is projected to expand by 3.1 per cent this year after only a modest downward revision of about 1.4 percentage points. The IMF said the kingdom's ability to redirect crude exports through Red Sea pipeline routes helped mitigate supply risks associated with shipping disruptions in the Gulf. Growth is forecast to strengthen further to 4.5 per cent in 2027 as non-oil sectors continue to gain traction under Vision 2030 reforms.
The UAE is also expected to maintain steady momentum despite global headwinds. The IMF revised the country's 2026 growth forecast to 3.1 per cent, down by 1.9 percentage points from earlier projections. Economists attribute the resilience to strong non-oil activity, expanding trade partnerships under Comprehensive Economic Partnership Agreements, and continued investment inflows into logistics, finance and technology sectors.
Oman is forecast to record the fastest growth among GCC economies this year at about 3.5 per cent, even after a slight downward adjustment of 0.5 percentage points. Fiscal reforms and improved debt management continue to support investor confidence in the sultanate's medium-term outlook.
Elsewhere in the bloc, Kuwait's economy is projected to contract by around 0.6 per cent following a sharp revision of 4.5 percentage points, while Bahrain is expected to see a marginal contraction of 0.5 per cent after a downgrade of nearly 3.8 percentage points. Analysts say both economies remain sensitive to oil revenue fluctuations and regional trade disruptions but retain capacity for recovery as conditions stabilise.
Qatar recorded the steepest revision in the IMF's projections, with growth expected to contract by 8.6 per cent this year after a downward adjustment of 14.7 percentage points. The revision reflects temporary external pressures linked to trade flows and energy logistics rather than structural weakness, economists noted.
The IMF said the closure or partial disruption of the Strait of Hormuz, combined with rising commodity prices and shipping insurance costs, played a central role in lowering growth expectations across the region for 2026 and 2027. However, the degree of impact varies widely depending on each country's exposure to energy exports and food imports.
Separately, the United Nations Development Programme warned that the broader Arab region could face economic losses of up to $200 billion as a result of the conflict, with regional GDP potentially contracting between 3.7 per cent and 6 per cent under severe disruption scenarios.
Still, other multilateral institutions maintain a constructive medium-term outlook for the Gulf. The World Bank has repeatedly highlighted the GCC's strong fiscal buffers, sovereign wealth assets and accelerating diversification strategies as key stabilising factors supporting growth beyond the current cycle.
Taken together, the forecasts suggest that while geopolitical shocks are temporarily weighing on momentum, the GCC economies remain among the region's most resilient performers - supported by infrastructure spending, energy flexibility and expanding non-oil sectors that continue to anchor investor confidence.
Khaleej Times
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