Despite global uncertainty, Gulf growth to accelerate on oil recovery, resilient sectors
The Gulf economies are on track for a solid recovery in growth, with output forecast to rise from 3.2% in 2025 to 4.8% by 2027, according to the World Bank’s latest Global Economic Prospects: MENA Outlook released this month.
This acceleration is expected to come from higher oil production, as countries begin phasing out voluntary output cuts, and continued strength in non-oil sectors like tourism, construction, and services—even as global demand for crude softens.
The World Bank’s report paints a mixed but improving picture for the broader Middle East and North Africa (MENA) region. Regional growth is expected to reach 2.7% in 2025, rising to 4.1% by 2027, thanks to stabilising geopolitical conditions and resilient private sector activity in several non-oil economies.
Gulf outlook improving
The GCC countries—Saudi Arabia, UAE, Qatar, Kuwait, Bahrain, and Oman—are set to benefit from the planned rollback of oil production cuts announced in April 2025. While oil prices are expected to remain subdued due to weakening global demand, volume increases should help lift fiscal revenues and growth.
At the same time, non-oil sectors continue to expand, supported by investment in infrastructure, tourism, real estate, and manufacturing—key pillars of national diversification plans under Saudi Vision 2030 and similar strategies in other Gulf states.
Trade tensions, inflation risks
In the wider MENA region, activity in oil-importing economies like Egypt, Morocco, and Tunisia is also forecast to pick up over the next three years. Egypt’s growth outlook has been lifted thanks to recent investment deals with the UAE, while Morocco and Tunisia are expected to benefit from better agricultural output and easing inflation.
Growth in low-income and fragile states remains varied. The World Bank projects Lebanon to grow by 4.7% in 2025—assuming a ceasefire holds—while West Bank and Gaza may only begin recovery in 2026, depending on reconstruction timelines. In Yemen, GDP is expected to contract again this year due to continued conflict and instability.
More risks to the outlook
The World Bank warns that trade protectionism and policy uncertainty remain the biggest risks for the region. If global trade tensions escalate or persist, investment confidence may drop, particularly in export-reliant economies.
Rising interest rates, if driven by renewed global inflation, could also lead to higher borrowing costs, capital outflows, and currency pressures across both oil exporters and importers.
Moreover, a sharp decline in oil prices or a resurgence of regional conflicts, particularly in Gaza, Lebanon, or Yemen, could significantly derail growth trajectories.
Bottom line?
While growth in the MENA region—particularly the Gulf—is set to rebound over the medium term, the World Bank stresses that geopolitical stability, trade resilience, and domestic reform momentum will be critical to sustaining recovery.
GCC economies are expected to remain the region’s bright spot, with non-oil sector resilience providing a buffer against external shocks, but the outlook remains sensitive to global trends and regional tensions.
TunisianMonitorOnline (Team)
