2026 Regional Economic Forecasts

Property prices have actually come under pressure after a duration of strong development, with recent data from the Dubai Land Department revealing a drop in home loan transactions and cash sales. We think the danger of a lasting migrant outflow and an extreme slump in the real estate sector is low.

As a lasting US-Iran offer takes shape, the fallout from the conflict has tightened up regional financial conditions, exposing vulnerabilities through capital outflows, broader bond spreads, and weaker financier sentiment. Most GCC sovereigns carry fairly little debt and funding dangers are for that reason limited in the UAE, the reserve bank's liquidity management has reduced instant concerns.

That said, Bahrain has been able to rely on assistance from neighbours, including Saudi Arabia and the UAE, and it effectively raised $1bn from an oversubscribed sovereign bond sale this month, marking the first offering from the area given that the war started. High-frequency fiscal information highlight the strain on local public financial resources from the conflict.

ANSR July GCC PRs 50DR+

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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 decline in oil earnings and a rise in spending, especially on subsidies, reflecting contingency outlays connected to the regional environment and an acceleration of Vision 2030 costs. In Qatar, the crisis brought oil and gas profits to a stop, swelling the spending plan deficit to the largest considering that 2017.

GCC inflation dynamics remain irregular, with food rates the primary source of upward pressure and inflation in this category strengthening in Kuwait, Oman and Qatar. By contrast, food inflation remains fairly controlled in Saudi Arabia, likely reflecting the mitigating result of its bigger domestic food production base and greater supply-chain durability.

We continue to see cost pressures as mostly temporal instead of indicative of a sustained inflationary cycle. Appropriately, we expect typical inflation to alleviate to 2.1% y/y in 2027 as temporary supply-side pressures dissipate. With near-term inflation elevated and transit through the Strait likely set to resume slowly, we expect the United States Federal Reserve to keep interest rates on hold up until December, and regional rate policies to follow fit.

We anticipate Iran's GDP to shrink by 10.8% this year (we forecast a 9.4% contraction three months ago). Oil production and exports, which provide essential income and FX inflows, have been curtailed by the United States marine blockade, while non-oil activity has been significantly hit. In Iraq, oil exports have actually collapsed to a drip and we're forecasting GDP to agreement by around 22% this year, with a sharp 33% rebound in 2027 as oil exports normalise.

By contrast, Syria continues to reintegrate into the worldwide economy after more than a decade of civil war. We expect GDP development to typical 9.6% over 2026-2027, supported by restored financial investment, particularly in banking and energy, financial reforms, and the progressive reopening of regional trade links.

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The World Bank has slashed its 2026 growth forecast for Middle East economies, saying overall GDP development in the region is expected to slow from an approximated 3.6% in January to 1.8% for 2026. The closure of the strategic Strait of Hormuz, and damage of energy and public infrastructure, had actually interrupted markets, increased financial volatility, and compromised the 2026 development outlook, the World Bank Group said in its Economic Update for the Middle East, North Africa, Afghanistan and Pakistan.

The April 2026 World Bank's Macro Poverty Outlook anticipates that the area's aggregate (excluding the Iran) GDP growth will decelerate to 1.8 percent in 2026, below 4.0 percent approximated for 2025. The 2026 projection has been reduced by 2.4 percentage points given that the January projections, showing the adverse effects of the continuous dispute.

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

Qatar: Especially, growth forecast for the Qatari economy has actually seen a sharp decline of 11.0 portion points because January. The economy is now anticipated to tape a contraction of 5.7%, below an approximated growth of 5.3%, due to extreme obstruction to liquefied gas materials. Qatar is a key gamer in the global energy market, with a worldwide market share of melted gas (LNG) products varying between 20% and 21%.

Kuwait relies completely (100%) on the Strait of Hormuz to export its petroleum and derivatives. Subsequently, closing the strait would suggest a complete shutdown of the nation's financial lifeline, right away halting profits inflows to the state budget plan. Bahrain: Growth forecast for Bahrain's economy has declined by 1.8 portion points considering that January.