GCC economy seen growing by 4% in 2025 despite global trade uncertainty
Muscat: The GCC economy is expected to show resilience in the face of rising global protectionism and geopolitical tensions, according to the latest ICAEW Economic Insight report, prepared by Oxford Economics.
Despite the uncertain global trade and economic outlook, the report forecasts that GCC economies will grow by 4% in 2025, up from an estimated 1.8% in 2024.
While US President Donald Trump's tariff policies have created uncertainty over external demand, the GCC remains largely insulated from direct tariff impacts. The region's non-energy sectors are projected to grow by 4.4% this year, up from an estimated 3.9% in 2024, with regional PMI data firmly in expansionary territory, according to the ICAEW report.
GCC growth to withstand tariff headwinds
Following recent OPEC+ policy shifts, oil production will gradually increase from April, boosting oil-sector growth to 3.2% after two years of contraction. Saudi Arabia's oil output is expected to reach 9.3mn barrels per day, driving oil sector growth of 1.9%, while the UAE's higher quota of 3.5mn barrels per day will support 4.8% growth.
Oil prices have fallen sharply in recent weeks due to tariff threats and increased OPEC+ supply, with prices forecast to average $70.5 per barrel this year, down from $80.5 in 2024.
Saudi Arabia and the UAE are expected to lead non-oil sector growth with 5.8% and 4.8%, respectively. Tourism – the fastest-growing sector across the region in 2024 – will remain a key driver of growth, with Saudi Arabia expecting continued expansion, supported by the GCC-wide visa initiative.
Qatar's GDP is forecast to expand by 2.1% this year, with growth expected to more than double in 2026 as additional LNG capacity comes online. The non-energy economy is projected to grow by 2.9% this year, remaining the primary growth driver.
Bahrain's economy is set to double its growth rate to 2.8% this year, with the non-oil economy expanding by 3.1%. The oil sector, after contracting by an estimated 2.4% in 2024, is expected to see a modest recovery of 0.9%.
Hanadi Khalife, Head of Middle East at ICAEW, said, 'The business landscape across the GCC continues to demonstrate resilience and adaptability in the face of global economic uncertainty. We are seeing strong investment in key sectors like tourism and infrastructure, which are creating new opportunities for growth.'
Scott Livermore, ICAEW Economic Advisor and Chief Economist and Managing Director at Oxford Economics Middle East, said, 'The GCC's projected 4% growth in 2025 highlights the region's ability to withstand external pressures while advancing its diversification efforts. Despite softer oil prices, the gradual easing of OPEC+ production cuts will support energy sector growth after two years of contraction.'
According to the ICAEW report, the aggregate GCC inflation projection for 2025 remains at 2.3%, with inflation expected to stabilise around 2% in the medium term. Recent readings show inflation is below 1% in Bahrain, Oman, and Qatar, while in Saudi Arabia – the region's largest economy – inflation averaged 1.7% in 2024, driven almost exclusively by rising housing rents.
Regional budgets this year continue to balance fiscal discipline with sustainable economic growth, with a strong focus on social development, including education and healthcare.
'Given our oil price and production forecasts, and expectations of a modest rise in government spending, we anticipate the aggregate GCC budget position will be broadly balanced, thanks to surpluses in Qatar and the UAE,' ICAEW said.
Meanwhile, the report expects Saudi Arabia to run a budget deficit of 3% of GDP as the government pursues strategic investments.
© Apex Press and Publishing Provided by SyndiGate Media Inc. (Syndigate.info).
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