Economic growth in the GCC region is expected to accelerate in the coming years, rising to 3.7 percent this year and 4.5 percent in 2025. In its latest report, the GCC Statistical Center also expected the region’s GDP to grow 3.5 percent in 2026.
This accelerated growth was attributed to an increase in oil production in the coming two years and a continued recovery in key sectors including tourism, transportation and infrastructure. The report also expects the GCC region’s growing non-oil sector to significantly boost GDP growth going forward.
Oil output to drive growth
GCC states have abided by OPEC+ oil output cuts since 2022 which impacted their oil revenues. OPEC+ members are cutting 5.86 million barrels per day of output or about 5.7 percent of global demand, a decision they took over two years ago to support the crude market.
The Organization of the Petroleum Exporting Countries and allies like Russia said in its latest statement that countries will extend their additional voluntary adjustments of 2.2 million barrels per day, which they announced in November 2023, until the end of March 2025.
With a potential increase in oil production, the GCC region will see an increase in oil revenues in the next two years, further supporting its GDP growth.
Region’s non-oil economy to expand
The non-oil sector will also support the GCC region’s GDP growth. The statistics center expects the region’s non-oil sector to grow 4.5 percent in 2024. This growth will significantly accelerate to 7.8 percent in 2025 and 8.6 percent in 2026.
In its latest Gulf Economic Update, the World Bank says that the region’s growth continues to be driven by the non-oil sector which has shown robust growth of 3.7 percent, mainly due to ongoing diversification efforts and ambitious reforms throughout the region.
The World Bank and the GCC Statistical Center vary widely in their economic projections for the region. The World Bank expects the GCC region to have subdued GDP growth of 1.6 percent in 2024 but forecasts a growth of 4.2 percent in 2025-2026.
GDP forecasts from the IMF indicate an accelerating growth rate for the wider region to 2.8 percent in 2024, up from 2 percent in 2023, and 4.2 percent in 2025.
For GCC members, the non-oil sector will be a primary driver of growth as the region continues to diversify its economies, added the IMF. The region also stands to benefit from shifting trade patterns by reducing trade barriers, diversifying products and markets and developing alternative trade corridors.
Inflation to slow by 2026
Inflation rates in GCC states will reach 2.4 percent this year, 2.6 percent in 2025 and 2.1 percent in 2026, the GCC Statistical Center report added. GCC states’ consumer price index hit 2.2 percent in 2023, a drop of 0.09 percent compared with 2022.
For its part, the World Bank said that inflation in 2024 remained low and stable at 2.1 percent, supported by subsidies, fuel price caps, and currency pegs. However, inflationary pressures in the housing sector persist in several countries. Rising government spending and a decline in oil revenues have impacted the fiscal sector, with significant variation across the region.
GCC countries outlook
According to the Fall edition of the Gulf Economic Update, GDP growth in the GCC region will vary.
Bahrain
In Bahrain, economic growth will improve in 2024 to 3.5 percent from 3.0 percent in the previous year. Over 2025-2026, growth is projected to reach 3.3 percent in line with the increase in the oil sector output.
Kuwait
Kuwait’s economic growth will likely contract by 1 percent in 2024, largely due to the extension of voluntary OPEC+ output cuts. However, the World Bank expects growth to pick up over 2025-2026 to reach 2.6 percent on rising oil output in addition to an acceleration of infrastructure projects in Kuwait.
Oman
Oman’s GDP growth will also decelerate in 2024 due to the extension of voluntary OPEC+ output cut. However, overall growth will likely increase over 2025-2026 to an average of 3 percent as oil output rises. In addition, ongoing reforms and investment in non-oil sectors in Oman are setting the stage for higher non-oil growth.
Qatar
In Qatar, the economy will grow slightly to an average of 2.4 percent in 2024-2025, reaching 4.1 percent in 2025-2026 amid the increase in gas production capacity.
Saudi Arabia
Following the contraction of 0.8 percent in 2023 in Saudi Arabia, real GDP will likely grow by 1.1 percent in 2024, driven primarily by robust growth in non-oil activities of 4.6 percent. Growth will likely accelerate to an average of 4.7 percent in 2025-2026 as oil production increases.
UAE
Finally, economic growth in the UAE will reach 3.3 percent in 2024, driven by a sustained expansion of 4.1 percent in the non-oil sector. In the medium term, overall GDP growth will accelerate to 4.1 percent in 2025 and 2026, supported by the recovery in oil production.
