GCC economies are poised for stronger-than-expected growth this year, despite mounting global trade tensions and lower oil prices, according to the latest ICAEW Economic Insight report for Q2, prepared by Oxford Economics.
The report highlights upgraded regional forecasts, with the GCC’s GDP now expected to expand by 4.4 percent in 2025, up from an earlier estimate of 4 percent.
While global GDP growth has been downgraded to 2.4 percent, the slowest pace since 2020, the GCC is bucking the trend. This is being driven by a quicker rollback of OPEC+ production cuts, lifting oil-sector growth forecasts from 3.2 percent in March to 4.5 percent.
“The GCC economies are showing remarkable adaptability amid shifting global trade dynamics. Investments in tourism, technology and infrastructure continue to pay dividends, strengthening resilience and laying the groundwork for long-term growth,” said Hanadi Khalife, head of Middle East, ICAEW.
GCC non-oil sectors to grow 4.1 percent
With Brent crude expected to average $67.3 p/b in 2025, the GCC region faces mounting fiscal pressure. Only Qatar and the UAE are projected to maintain fiscal surpluses in 2025, highlighting the challenge of balancing growth ambitions with budget constraints.
The impact of the U.S. 10 percent tariff on imports from GCC countries is expected to be limited, given the region’s low U.S. export exposure and the exemption of energy products.
Meanwhile, non-oil sectors in the GCC are forecast to grow 4.1 percent this year, supported by strong domestic demand, investment momentum and diversification initiatives. The region is also favorably positioned to absorb any trade rebalances resulting from tariff headwinds and geopolitical tensions.
“We have upgraded our GCC forecast due to faster OPEC+ output increases and sustained non-oil momentum in key economies like Saudi Arabia and the UAE. While uncertainty and trade shifts may place pressures on fiscal policy, the region’s two key economies are expected to continue to progress toward economic diversification and attract global capital at an accelerated pace,” said Scott Livermore, ICAEW economic advisor, and chief economist and managing director, Oxford Economics Middle East.
Non-oil dynamism and higher output lift Saudi growth
Among the most notable GCC economies, the oil economy of Saudi Arabia is now forecast to grow by 5.2 percent in 2025, up sharply from the 1.9 percent forecast in March, reflecting increased oil output and momentum. Production is averaging 9.7 million barrels per day, while non-oil sectors, led by construction and trade, continue to expand.
In Q1, growth reached 3.4 percent, driven by a 4.9 percent expansion in non-oil activities in line with the full year non-oil growth projection of 5.3 percent.
The rebasing of national accounts boosted the non-oil sector’s share of GDP, reinforcing the Kingdom’s diversification drive. However, weaker oil prices are expected to widen the fiscal deficit to 3.4 percent of GDP. With oil revenues down 18 percent annually in Q1 and spending still rising, Saudi Arabia’s debt-to-GDP ratio is forecast to edge above 30 percent in 2025.
Despite the risks, investor sentiment remains positive, with S&P recently upgrading the Kingdom’s credit rating to A+.
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Investment and diversification power UAE’s growth momentum
In the UAE, the economy is forecast to grow 5.1 percent in 2025, driven by a recovery in oil output, a 4.7 percent rise in non-oil GDP, as well as deepening trade ties and enhanced market access.
Tourism remains a key growth driver, with international visitor spending expected to contribute nearly 13 percent of GDP in 2025. In Q1, Dubai welcomed 5.3 million international visitors, up 3 percent annually, consolidating its position as a leading tourism hub in line with the D33 agenda.
Strategic investments are also fuelling momentum, including a $1.4 trillion investment pipeline and new AI-focused collaborations following President Trump’s May visit. Inflation is projected at 2.5 percent in 2025, led by rising housing costs. While rising tariffs are likely to suppress global inflation, a weaker U.S. dollar may push up import prices in the UAE—particularly from non-dollar trade partners—offsetting some of the disinflationary effects.
