Largely unaffected by recent geopolitical turmoil, the economic outlook for the Gulf economies remains fair against the backdrop of solid-to-manageable macroeconomic fundamentals. The International Monetary Fund projects solid economic growth against the backdrop of low inflation and strong current account and external financial positions. Oil prices and production levels, particularly in the case of swing producers like Saudi Arabi and the United Arab Emirates, will continue to affect economic growth, despite decadeslong attempts to diversify Gulf economies away from oil and gas production. Ongoing structural reform have helped increase the share of the non-hydrocarbon economy, even though Kuwait, Qatar and Saudi Arabia remain highly reliant on oil and gas exports, while Bahrain and the UAE have made progress towards diversification by developing their tourism, finance, logistics and manufacturing.
> The IMF projects regional real GDP growth of 3.5-4% over the next few years, barring major decline of hydrocarbon output and/ or decline of hydrocarbon prices.
> GCC per capita incomes on a purchasing power parity basis vary significantly, ranging from extremely high levels in Qatar ($122,000) and the UAE ($82,000) to high levels in Bahrain ($68,000) and Saudi Arabia ($62,000) to fair level in Kuwait ($51,000) and Oman ($42,000). By comparison, U.S. per capita income is $75,000.
> Saudi Arabia is by far the largest GCC economy with a nominal gross domestic product at market exchange rates of $ 1.1 tr, compared to $550 bn in the UAE, $220 in Qatar, $100 bn in Oman and $ 50 bn in Bahrain.
> Economic and financial stability in the GCC is fair to high. Bahrain is the only country with a sub-investment grade assigned by international rating agencies. Oman has a borderline investment rating, while Saudi Arabia, Qatar, and the UAE are all rated A or higher.
Although the GCC have built fiscal buffers to counter the negative effects of lower oil prices, both their balance-of-payments and their fiscal accounts remain very sensitive to hydrocarbon prices and output, despite the greater share of non-hydrocarbon output. Except for Bahrain, the GCC have accumulated large financial buffers to withstand even prolonged oil price weakness, even if economic growth would suffer in such a scenario. GCC central banks have sufficiently large central bank foreign-exchange reserves to maintain their dollar pegs, and GCC banking systems are well-capitalized, liquidity and profitable so as not to be a significant source of contingent liabilities for their government.
> Having declined in recent years, the share of the non-hydrocarbon economy remains high in the GCC, ranging from 60-65% in Kuwait, Oman, and Qatar, to 75% in the UAE and around 85% in Bahrain.
> The GCC have formally pegged their exchange to the U.S. dollar since 2003. The majority of GCC countries had effectively pegged their respective currencies to the U.S. dollar since the 1970s and 1980s. This has helped maintain exchange rate stability and low inflation and ensured that central banks effectively shadow Federal Reserve interest rate policy.
> Public debt is low and manageable, except in Bahrain. Only Saudi Arabia and Bahrain are projected to run fiscal deficits in 2025-28. And only Saudi Arabia is projected to run a modest, very manageable current account deficit. By the end of the decade, public debt in Bahrain is projected to exceed 140% of GDP, while debt levels in all other GCC countries are projected to remain below a modest 40% of GDP.
> Regional government bonds markets have proven very resilience during the COVD-19 crisis and recent geopolitical tensions. Regional banking sectors are well-capitalized, liquid and profitable, as per the IMF.
The outlook for Saudi Arabia, the GCC’s largest economy, is fair. Like the other GCC economies, it has demonstrated significant resilience in the face of recent exogenous shocks. Non-hydrocarbon activity has been expanding, including against the backdrop of Vision 2030 related, largely government-led investment, inflation has remained low and unemployment reaching record-low levels. Like in the other GCC except for Bahrain and the partial exception of Oman, external and fiscal buffers remain significant, despite modest current and fiscal deficits. As a country with major spare oil production capacity and a country that has historically acted as a swing producers, changes in oil prices and output would, if the related revenues are channeled into the local economy, have a significant impact on the economic outlook.
> The IEA forecast oil prices to average $69 per barrel this year, before declining to $58 in 2026 against the backdrop of a significant buildup of oil inventories. At the beginning of August, Brent crude was trading at $67.
> The IMF currently projects real GDP growth of 3.6 and 3.9% in 2025 and 2026, continued low consumer price inflation of around 2% and fiscal deficits of 4% or less in 2025-26. The Fund projects public debt to increase from a low 26% of GDP in 2024 to a modest 33% of GDP in 2026. Current account deficits will average 3% of GDP, but around half of the deficit is financed by FDI inflows. Saudi Arabia also remains a major net international creditor.
> SAMA sits on net foreign assets exceeding $400 bn, which is more than adequate to maintain the peg to the dollar. The banking sector remains solid and is characterized by high capitalization, profitability, while nonperforming loans are near ten-year lows.