2026 GCC Economic Outlook

Residential or commercial property costs have actually come under pressure after a period of strong development, with recent information from the Dubai Land Department showing a drop in home loan deals and cash sales. We think the danger of a lasting migrant outflow and a severe slump in the genuine estate sector is low.

As a lasting US-Iran deal takes shape, the fallout from the dispute has tightened local financial conditions, exposing vulnerabilities through capital outflows, broader bond spreads, and weaker financier belief. The majority of GCC sovereigns bring fairly little financial obligation and funding threats are for that reason restricted in the UAE, the reserve bank's liquidity management has actually minimized instant issues.

That said, Bahrain has actually had the ability to depend on assistance from neighbours, including Saudi Arabia and the UAE, and it successfully raised $1bn from an oversubscribed sovereign bond sale this month, marking the first offering from the area considering that the war started. High-frequency financial information highlight the strain on local public finances from the conflict.

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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 aids, reflecting contingency expenses tied to the local environment and an acceleration of Vision 2030 spending. In Qatar, the crisis brought oil and gas profits to a halt, swelling the deficit spending to the biggest given that 2017.

GCC inflation characteristics stay uneven, with food rates the main source of upward pressure and inflation in this classification conditioning in Kuwait, Oman and Qatar. By contrast, food inflation remains reasonably controlled in Saudi Arabia, most likely reflecting the mitigating impact of its larger domestic food production base and greater supply-chain strength.

We continue to see rate pressures as mainly temporal instead of indicative of a continual inflationary cycle. Accordingly, we anticipate average inflation to ease 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 expect the United States Federal Reserve to keep interest rates on hold till 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 3 months ago). Oil production and exports, which offer important profits and FX inflows, have been reduced by the US naval blockade, while non-oil activity has been severely struck. In Iraq, oil exports have collapsed to a drip 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 global economy after more than a years of civil war. We anticipate GDP development to typical 9.6% over 2026-2027, supported by renewed investment, especially in banking and energy, monetary reforms, and the gradual reopening of regional trade links.

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The World Bank has slashed its 2026 development projection for Middle East economies, saying general 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 tactical Strait of Hormuz, and damage of energy and public infrastructure, had actually interfered with markets, increased financial volatility, and compromised the 2026 growth outlook, the World Bank Group stated 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 (excluding the Iran) GDP growth will decelerate to 1.8 percent in 2026, down from 4.0 percent estimated for 2025. The 2026 forecast has actually been downgraded by 2.4 percentage points because the January forecasts, showing the unfavorable effects of the ongoing conflict.

Saudi Arabia: Projection was reduced by 1.2 portion points considering that January. Growth is now anticipated to slow from 4.3% in 2025 to 3.1% in 2026, noting that Saudi Arabia's outlook stays the greatest among Gulf economies. United Arab Emirates: Growth projection for the UAE has fallen by 2.7 percentage points since January.

Qatar: Notably, development forecast for the Qatari economy has seen a sharp decrease of 11.0 portion points since January. The economy is now expected to tape-record a contraction of 5.7%, down from an approximated development of 5.3%, due to severe blockage to melted gas supplies. Qatar is a crucial player in the global energy market, with a global market share of melted natural gas (LNG) products ranging between 20% and 21%.

Kuwait relies totally (100%) on the Strait of Hormuz to export its unrefined oil and derivatives. Closing the strait would suggest a complete shutdown of the country's monetary lifeline, instantly halting revenue inflows to the state budget plan. Bahrain: Development forecast for Bahrain's economy has declined by 1.8 portion points since January.