GCC Economies Outlook for 2026: Growth Projections and Key Drivers

GCC economies are expected to see stronger growth in 2026, with international institutions projecting expansion of around 4.4–4.5 percent, driven primarily by non-oil sectors and diversification policies. With stable macroeconomic conditions and a more balanced role for hydrocarbons, 2026 is shaping up as a consolidation year that reinforces the region’s transition toward a more resilient growth model.

Despite ongoing geopolitical tensions and security risks across the Middle East, the economies of the Gulf Cooperation Council (GCC) have continued to demonstrate resilience, maintaining positive growth momentum in recent years.

While conflicts in the wider region and global economic uncertainty remain a structural constraint, GCC countries have so far limited their impact on domestic economic performance through strong fiscal positions, policy continuity, and sustained investment.

Looking ahead to 2026, international institutions broadly agree that growth across the GCC is set to strengthen, supported by accelerating non-oil activity, economic diversification programs, and improving macroeconomic conditions. Rather than marking a cyclical rebound, 2026 is increasingly viewed as a consolidation year, in which diversification-led growth becomes more deeply embedded in the region’s economic model, reducing reliance on hydrocarbons and increasing resilience to external shocks.

Growth projections for 2026

Forecasts from major institutions broadly converge on a stronger GCC growth profile in 2026 than in 2025, supported by resilient domestic demand, continued non-oil expansion, and (to varying degrees) a firmer hydrocarbon contribution.

Oxford Economics expects real GCC GDP growth of 4.4 percent in 2026, up from 4.0 percent in 2025. The World Bank, on the other hand, projects 3.2 percent growth in 2025, accelerating to 4.5 percent in 2026. The IMF similarly sees momentum improving, with GCC output growth projected to rise from 1.7 percent in 2024 to 3.3 percent on average in 2025, reflecting a shift toward more positive overall conditions.

In relative terms, these projections position the GCC above the global growth baseline and at the upper end of emerging-market performance. The IMF’s World Economic Outlook (October 2025) projects global growth easing to 3.1 percent in 2026, with advanced economies around 1.5 percent and emerging market and developing economies just above 4 percent.

On that comparison, a 4.4–4.5 percent GCC expansion would place the region materially ahead of the world average and slightly above (or broadly in line with) the emerging-market aggregate, reinforcing the GCC’s status as a relatively high-growth pocket—provided that regional risk conditions remain contained and reform momentum holds.

Non-oil sectors as the primary growth engine

Non-oil activity is expected to remain the main driver of GCC growth in 2026, reflecting steady progress in economic diversification across the region. Data from the GCC Statistical Center show that non-oil sectors already account for more than 73 percent of total GDP, a share that has continued to rise as governments expand investment in services, infrastructure, and technology.

According to Oxford Economics, non-energy activity across the GCC is projected to grow by around 4.1 percent in 2026, supported by strong labor markets, improving credit conditions, and rising investment in technology and AI-related infrastructure. Key contributors include services, construction, logistics, tourism, financial services, and technology-driven activities, with Saudi Arabia and the UAE leading regional momentum.

Public-sector investment and reform remain central to sustaining this trend. Policy measures aimed at attracting foreign direct investment, easing foreign ownership rules, expanding capital markets, and supporting private-sector participation continue to underpin non-oil expansion and reduce the region’s exposure to oil price volatility.

The role of oil in a more balanced growth model

While hydrocarbons no longer dominate the growth outlook, oil revenues are expected to play a supportive role in 2026. Production growth is likely to remain constrained in the first half of the year as OPEC+ extends its pause on output increases, reflecting elevated inventories and softer price expectations.

Oxford Economics expects Brent crude prices to fall below USD 60 per barrel in early 2026, limiting the near-term contribution of oil extraction to GDP. However, oil supply is forecast to rise again in the second half of the year, with a full unwinding of remaining production caps likely by mid-2027. In this context, hydrocarbons are expected to stabilize fiscal positions rather than serve as the primary growth engine.

Macroeconomic conditions and domestic demand

Macroeconomic conditions across the GCC remain broadly supportive of growth. Inflation is expected to stay low, with the IMF forecasting average inflation of 2 percent across the region in 2026. Stable prices are helping preserve real household incomes and underpin consumer spending, which Oxford Economics expects to grow by an average of 3.5 percent over 2026–2027.

Monetary conditions are also set to ease. Due to currency pegs to the US dollar, GCC central banks are expected to follow the US Federal Reserve in cutting interest rates, lowering borrowing costs and supporting credit expansion. Improved access to finance is expected to sustain private investment and consumption, particularly in non-oil sectors.

Strategic sectors and structural transformation

Artificial intelligence and advanced technologies are emerging as strategic pillars of the GCC’s medium-term growth model. Governments across the region are investing heavily in data centers, energy capacity, digital infrastructure, and skills development, while introducing more pragmatic regulatory frameworks to support experimentation and innovation.

Saudi Arabia and the UAE are at the forefront of this shift. Saudi Arabia’s non-oil activity continues to strengthen, with PMI readings exceeding 60 and non-oil exports rising more than 17 percent year to date, supported by industrial expansion and regulatory reforms under Vision 2030. The UAE, meanwhile, is forecast to post GDP growth of 5.6 percent in 2026, driven by tourism, trade, financial services, and population growth, alongside higher government spending under the “We the UAE 2031” strategy.

Risks and constraints to the outlook

Despite the positive outlook, risks remain. Regional geopolitical tensions could weigh on trade, investment, and investor sentiment if they escalate, while prolonged oil market weakness may pressure fiscal balances in some countries. In Saudi Arabia, for example, softer oil prices are expected to widen the fiscal deficit to around 5.6 percent of GDP in 2026, even as government spending remains central to long-term diversification goals.

Against this backdrop, policy continuity, fiscal discipline, and reform implementation will be critical to maintaining growth momentum and market confidence.

Implications for businesses and investors

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For foreign investors, sustained non-oil growth across the GCC translates into expanding opportunities in services, logistics, tourism, finance, technology, and AI-related industries. Saudi Arabia and the UAE are expected to remain the region’s primary growth engines in 2026, supported by strong domestic demand, investment-led expansion, and ongoing regulatory reforms.

Companies considering market entry or expansion should factor in sector-specific incentives, rising competition in non-oil industries, and the importance of aligning with national development strategies. While hydrocarbons will continue to shape fiscal dynamics, the region’s growth trajectory is increasingly anchored in diversified, private-sector–led activity.

Conclusion: Outlook for 2026

Overall, forecasts point to a strengthening GCC growth profile in 2026, with GDP expansion of around 4.4–4.5 percent driven primarily by non-oil sectors, resilient domestic demand, and structural reforms. As diversification deepens and macroeconomic conditions remain supportive, 2026 is set to mark an important consolidation phase in the GCC’s long-term economic transformation.

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