THE GCC’s long-term economic outlook remains positive despite near-term adjustments to 2026 growth forecasts, according to the latest ICAEW Economic Insight Q1 2026 report, produced in partnership with Oxford Economics.
While geopolitical factors have led to a revised GDP forecast of minus 0.2 per cent for this year, the report highlights a significant “catch-up” surge in 2027, with growth expected to skyrocket to 8.5pc.
The report underscores that the region’s strong economic foundations and investment appeal remain unchanged. While global and regional energy markets face temporary volatility, the policy response across the GCC has been swift. Experts note that the current environment is prompting a constructive reassessment of capital allocation towards strategically vital sectors, including AI, healthcare, and financial services.
In the energy sector, Saudi Arabia and Oman are effectively utilising infrastructure like the East-West and Habshan-Fujairah pipelines to maintain trade flows. These strategic bypasses allow for the rerouting of 7 million barrels per day, helping to stabilise fiscal positions as Brent oil prices remain above the $100 per barrel mark.
For economies more reliant on the Strait of Hormuz, such as Bahrain, Qatar, and Kuwait, the report identifies a period of temporary consolidation in output as global shipping costs and insurance premiums adjust. Although GCC oil sector output may see a 5.8pc dip this year, a powerful recovery of 18.2pc is anticipated for 2027 as export routes normalise.
The tourism and consumer sectors are also navigating a period of transition. While international arrivals may see a temporary cooling, leading to a revised household consumption growth of 1.4pc, the report notes that this is largely driven by a pivot toward precautionary savings. Inflation remains manageable, with a revised annual CPI forecast of 2.5pc for 2026, expected to ease further by 2027.
Commenting on the findings, Hanadi Khalife, regional director of MEASA at ICAEW, said: “While the near-term environment remains complex, the policy response across the region has been both swift and targeted. In the UAE, support for SMEs and the tourism sector is helping to stabilise activity and sustain confidence. Together with the region’s diversification progress, this is expected to support a steady recovery as conditions ease.”
Azad Zangana, head of GCC macroeconomic analysis, added that the current impact reflects the diverse economic structures of the GCC.
“As trade flows normalise, energy markets are expected to recover first, with other sectors, including tourism, following as confidence strengthens. This phased recovery highlights the region’s breadth of growth drivers, with the overall rebound supported by the strength of underlying fundamentals,” he added.
avinash@gdnmedia.bh
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