Riyadh, June 19, 2025 — Economic growth across the Gulf Cooperation Council (GCC) is projected to increase in the medium-term to 3.2% in 2025 and 4.50% in 2026. This growth is likely to be driven by the expected rollback of OPEC+ oil production cuts and robust expansion of non-oil sectors.
According to the latest edition of the Gulf Economic Update (GEU), regional growth was 1.7% in 2024 – an improvement from 0.3% in 2023. The non-hydrocarbon sector remained resilient, expanding by 3.7% — largely fueled by private consumption, investment, and structural reforms across the GCC.
At the same time, global trade uncertainty presents challenges, as a global economic slowdown remains a key downside risk for the region. To mitigate these risks, GCC countries need to accelerate economic diversification reforms and strengthen regional trade.
"The resilience of GCC countries in navigating global uncertainties while advancing economic diversification underscores their strong commitment to long-term prosperity,” said Safaa El Tayeb El-Kogali, Division Director for the GCC countries at the World Bank. "Strategic fiscal policies, targeted investments, and a strong focus on innovation, entrepreneurship, and job creation for youth are essential to sustaining growth and stability."
The report titled "Smart Spending, Stronger Outcomes: Fiscal Policy for a Thriving GCC”, discusses the effectiveness of fiscal policy in ensuring macroeconomic stabilization and encouraging growth. The topic is particularly relevant as oil price fluctuations strain budget balances in several countries across the region. Some GCC countries are projected to experience increasing fiscal deficits in 2025, emphasizing the need for understanding the effectiveness of fiscal policy.
The report finds that government spending in the GCC region has effectively stabilized economies, especially during recessionary episodes. The findings show that a 1-unit increase in fiscal spending can boost non-hydrocarbon output by 0.1-0.45 units in the region. The report also finds a marginal impact of government investment on non-hydrocarbon output – a 0.07 percent change in potential output for a one-time percentage point increase in investment.
Th report also showcases Oman’s fiscal consolidation journey as a noteworthy example of effective economic reform and responsible fiscal management. It highlights the challenges Oman has faced due to oil dependency, the measures it implemented to restore fiscal balance, and the encouraging outcomes of these reforms. Under its Medium-Term Fiscal Plan 2020-2024, Oman introduced wide-ranging reforms to diversify revenue sources, improve expenditure efficiency, and prudently managing hydrocarbon windfalls. Oman’s reforms have yielded tangible results since 2022, with a marked improvement in its fiscal position and a significant reduction in public debt.
GCC Countries Outlook
Bahrain: Growth is predicted to stabilize at 3.5% in 2025 after two years of decline. The improvement relative to 2024 (3% growth) is driven by the completion of BAPCO refinery upgrades and robust non-hydrocarbon growth in sectors supported by Bahrain’s Economic Vision 2030, including infrastructure, logistics, financial technology, and tourism. In 2026-2027, overall growth is expected to average 2.9% thanks to continued non-hydrocarbon growth and the expansion of Sitra oil refinery.
Kuwait: Economic growth is expected to recover significantly and reach 2.2% in 2025, compared to -2.9% in 2024 and -3.6% in 2023. The phase out of OPEC+ production caps and the expansion of non-hydrocarbon sectors supported by credit growth and large infrastructure projects explains this positive outlook. Over 2026-2027, economic growth is predicted to remain stable at 2.7%, while long-term economic outlooks hinge on the successful implementation of structural reforms and diversification efforts.
Oman: Growth is expected to gradually accelerate to 3% in 2025 (compared to 1.7% in 2024), 3.7% in 2026 and 4% in 2027. The rebound in oil production (2.1% oil GDP growth in 2025), along with solid non-hydrocarbon growth (3.4%) driven by robust growth in construction, manufacturing and services is expected to drive these sustained improvements in growth prospects.
Qatar: Economic growth is projected to remain stable at 2.4% in 2025 (2.6% in 2024), before accelerating to an average of 6.5% in 2026-2027 due to the expansion of LNG capacity. These improved prospects are supported by strong non-hydrocarbon growth, particularly in education, tourism, and services. The hydrocarbon sector is expected to growth timidly in 2025 (0.9%), before undergoing a significant boost in 2026 thanks to the North Field LNG expansion coming online, supporting a 40% rise in LNG output. Non-hydrocarbon growth is expected to remain robust thanks to infrastructure upgrades and international investments.
Saudi Arabia: Economic growth is projected to continue recovering after declining to 1.3% in 2023, rising to 2.8% in 2025 and an average of 4.6% in 2026-2027. The phasing out of OPEC+ voluntary production cuts is expected to take hydrocarbon GDP growth to 6.7% in 2026 and 6.1% in 2027. Meanwhile, non-oil GDP is expected to continue rising steadily, by 3.6% on average between 2025 and 2027, as the Kingdom pursues its economic diversification agenda under Vision 2030.
United Arab Emirates: Economic growth is expected to maintain its ascending trend to reach 4.6% in 2025 and stabilize at 4.9% in 2026 and 2027. Non-oil sectors are bound to remain a key engine of growth (4.9% growth in 2025), thanks to targeted public investment, governance improvements, and expanding external partnerships. Meanwhile, the normalization of oil production levels thanks to the phasing out of OPEC+ voluntary cuts is expected to support this ascending trend.
The cutoff date for this edition of the Gulf Economic Update date is June 1, 2025.
