Economic growth across the Gulf Cooperation Council (GCC) is projected to strengthen over the medium term, reaching 3.2 percent in 2025 and 4.5 percent in 2026, according to the latest Gulf Economic Update (GEU). This rebound is expected to be fueled by the phasing out of OPEC+ oil production cuts and continued expansion in non-hydrocarbon sectors.
In 2024, regional GDP growth improved to 1.7 percent, up from 0.3 percent in 2023. The non-oil economy remained resilient, expanding by 3.7 percent, supported by private consumption, investment, and ongoing structural reforms across the GCC region.
However, the report also warns of external headwinds, particularly the risks posed by global trade uncertainty and a potential slowdown in the world economy. To safeguard future growth, the GEU urges GCC countries to accelerate diversification efforts and enhance regional trade integration.
GCC fiscal policy under scrutiny amid budget pressures
The GEU report, titled Smart Spending, Stronger Outcomes: Fiscal Policy for a Thriving GCC, emphasizes the critical role of fiscal policy in maintaining macroeconomic stability and supporting long-term growth.
With oil price volatility placing pressure on national budgets, several GCC countries are projected to run fiscal deficits in 2025. The report stresses the importance of understanding fiscal effectiveness to ensure resilient and sustainable growth across the GCC region.
Key findings include:
- Government spending has historically stabilized GCC economies, particularly during downturns.
- A 1-unit increase in fiscal spending boosts non-oil output by 0.1 to 0.45 units.
- The impact of government investment on potential non-oil output is more limited — yielding only 0.07 percent growth for a one-time 1 percentage point increase in investment.
Oman’s fiscal reform: A regional case study
The report spotlights Oman’s Medium-Term Fiscal Plan (2020–2024) as a leading example of effective fiscal reform. Faced with fiscal imbalances and oil dependency, Oman introduced sweeping measures to diversify revenue streams, enhance spending efficiency, and prudently manage hydrocarbon windfalls.
Since 2022, Oman has achieved substantial progress, including a strengthened fiscal position and a sharp reduction in public debt, underscoring the long-term impact of well-managed reforms that are crucial for the GCC.
Country-level economic outlooks
Bahrain
Growth to rise to 3.5 percent in 2025 (up from 3 percent in 2024), driven by the completion of the BAPCO refinery upgrades and non-oil sector growth in infrastructure, logistics, fintech, and tourism. 2026–2027 growth to average 2.9 percent, supported by the Sitra refinery expansion.
Kuwait
Economic rebound to 2.2 percent in 2025, following contractions in 2024 (-2.9 percent) and 2023 (-3.6 percent). Growth sustained by the removal of OPEC+ cuts, credit expansion, and major infrastructure projects. Projected to stabilize at 2.7 percent in 2026–2027, contingent on reform implementation efforts across the GCC.
Oman
Growth forecast to reach 3 percent in 2025, up from 1.7 percent in 2024, and continue to 3.7 percent in 2026 and 4 percent in 2027. Driven by a recovery in oil output (2.1 percent) and strong performance in construction, manufacturing, and services.
Qatar
Stable growth of 2.4 percent in 2025, followed by a sharp increase to 6.5 percent average in 2026–2027. Boosted by LNG capacity expansion via the North Field project, raising LNG output by 40 percent. Strong momentum in education, tourism, and services, along with infrastructure upgrades benefiting the GCC region.
Saudi Arabia
Growth projected to rise to 2.8 percent in 2025 and average 4.6 percent in 2026–2027. Hydrocarbon GDP to grow 6.7 percent in 2026 and 6.1 percent in 2027 as OPEC+ cuts are lifted. Non-oil GDP expected to grow by 3.6 percent annually, aligned with Vision 2030 diversification goals within the GCC.
Growth to reach 4.6 percent in 2025, stabilizing at 4.9 percent in 2026 and 2027. Non-oil sectors remain the main GCC growth driver (4.9 percent in 2025), supported by strategic public investment, improved governance, and international partnerships. Normalization of oil production will further strengthen the outlook.
Conclusion
The GCC region is poised for stronger growth over the coming years, underpinned by a resurgence in oil output and a robust non-oil sector performance. However, sustaining this momentum will require targeted fiscal policy, continued reform, and resilience against global uncertainties.
As highlighted in the GEU, innovative and disciplined fiscal approaches — like Oman’s — will be essential in ensuring GCC’s long-term economic stability across the region.
