The GCC is poised to defy a weak global outlook, with regional growth set to nearly double that of the rest of the world this year.
According to the ICAEW’s Economic Insight Q3 2025 report, produced in collaboration with Oxford Economics, the GCC is on track for 4.1 per cent growth in 2025, speeding up to 4.6 per cent in 2026 — even as global GDP expansion slows to 2.7 per cent.
That outperformance is largely anchored in surging oil output. The report notes that Opec+ began unwinding production cuts ahead of plan in April, aiming to restore roughly 2.5 million barrels per day by end-October. This resumption of supply has lifted energy-sector growth projections to 4.9 per cent in 2025 and 6.0 per cent in 2026. The lion’s share of spare capacity lies in Saudi Arabia and the UAE, making those economies principal beneficiaries.
The stronger story lies in non-oil momentum. Non-energy sectors across the GCC are forecast to expand 4.0 per cent this year, buoyed by tight labour markets, robust consumer confidence, and ongoing efforts to diversify.
The UAE’s non-oil expansion is expected to remain especially vigorous: non-hydrocarbon growth of around 4.5 per cent in 2025–26 is widely forecast.
At the heart of that story is the UAE. In the first quarter of 2025, its economy grew 3.9 per cent year-on-year, underpinned by a 5.3 per cent rise in non-oil activity, which accounted for some 77 per cent of GDP. The Central Bank of the UAE has accordingly upgraded its full-year projection: it now expects 4.9 per cent GDP growth, with the hydrocarbon sector up 5.8 per cent and non-hydrocarbon growth of 4.5 per cent. These forecasts align with the region’s broader logic: high energy returns are feeding into investment, public spending, and private sector confidence.
Meanwhile, Saudi Arabia continues to be a strong GCC engine as well. The ICAEW outlook foresees about 4.2 per cent expansion in 2025, with non-oil sectors — led by construction, trade, finance, and logistics — growing around 5 per cent. Importantly, Saudi non-oil exports surged 16.5 per cent in first half of 2025, while the UAE saw an astonishing nearly 45 per cent jump over the same period — signaling heightened trade resilience amid external headwinds.
Saudi Arabia is expected to run a deficit equal to 3.6 per cent of GDP, but its finances remain solid thanks to rising non-oil revenues and a more disciplined spending path. Other GCC states such as Kuwait, Bahrain and Oman are also projected to see deficits, while Qatar and the UAE should maintain surpluses. The report frames this as evidence that diversification is no longer just a policy goal — it now underpins economic resilience in measurable ways.
Analysts say monetary policy is another tailwind. The ICAEW analysis expects the US Federal Reserve to start cutting interest rates imminently, a move that traditionally prompts GCC central banks to follow suit — given their dollar pegs. In sync with that, Gulf central banks — including those in the UAE and Saudi Arabia — have already trimmed key rates by 25 basis points. Lower financing costs, in turn, should support consumption, real estate, business investment and credit growth across the region.
The GCC also benefits from broader external trends. With global growth cooling, capital-starved investors are increasingly drawn to yield and stability. The Gulf’s relatively high returns, strong fiscal buffers, and diversification momentum may help it attract inflows even as developed markets sputter.
However, oil price volatility remains a constant wildcard: an oversupply or deeper global slowdown could erode hydrocarbon earnings. Regional geopolitics, especially tensions involving Qatar, also cast shadows over cross-border trade and investor sentiment. As Oxford Economics’ Scott Livermore puts it, recent geopolitical escalations add uncertainty to the near-term outlook even as the region’s blend of reforms and energy strength suggests it will outperform global peers.
If 2025 confirms these projections, the GCC will reassert itself as the fastest-growing major region in the world — and the UAE may emerge as the crown jewel. Its rising non-oil share, more mature fiscal posture, and ability to leverage energy gains make it a model for Gulf economies in transition.
