Essential Economic Expansion for 2026

Residential or commercial property costs have actually come under pressure after a period of strong growth, with current information from the Dubai Land Department showing a drop in mortgage deals and money sales. We believe the danger of a lasting migrant outflow and a serious slump in the real estate sector is low.

As a lasting US-Iran deal takes shape, the fallout from the conflict has actually tightened up local financial conditions, exposing vulnerabilities through capital outflows, broader bond spreads, and weaker investor sentiment. Many GCC sovereigns carry fairly little debt and financing risks are for that reason limited in the UAE, the main bank's liquidity management has relieved instant concerns.

That stated, Bahrain has actually been able to depend on assistance from neighbours, including Saudi Arabia and the UAE, and it successfully raised $1bn from an oversubscribed sovereign bond sale this month, marking the very first offering from the region considering that the war started. High-frequency fiscal information highlight the pressure on local public finances from the dispute.

ANSR July GCC PRs 50DR+

Advancing Industrial Growth through Global Diversification

In Saudi Arabia, the deficit spending more than doubled to SAR125.7 bn, or about 9% of GDP in Q1, driven by a decrease in oil earnings and a rise in spending, especially on subsidies, showing contingency expenses connected to the local environment and a velocity of Vision 2030 costs. In Qatar, the crisis brought oil and gas earnings to a halt, swelling the budget plan deficit to the biggest considering that 2017.

GCC inflation characteristics stay unequal, with food rates the primary source of upward pressure and inflation in this category strengthening in Kuwait, Oman and Qatar. By contrast, food inflation stays fairly subdued in Saudi Arabia, most likely showing the mitigating result of its larger domestic food production base and higher supply-chain resilience.

We continue to see rate pressures as mostly temporal rather than indicative of a continual inflationary cycle. Appropriately, we anticipate average inflation to ease to 2.1% y/y in 2027 as temporary supply-side pressures dissipate. With near-term inflation raised and transit through the Strait most likely set to resume gradually, we expect the United States Federal Reserve to keep rates of interest on hold up until December, and local rate policies to do the same.

We anticipate Iran's GDP to diminish by 10.8% this year (we forecast a 9.4% contraction 3 months ago). Oil production and exports, which supply vital profits and FX inflows, have actually been curtailed by the US marine blockade, while non-oil activity has actually been badly struck. In Iraq, oil exports have actually collapsed to a trickle and we're anticipating GDP to agreement by around 22% this year, with a sharp 33% rebound in 2027 as oil exports normalise.

By contrast, Syria continues to reintegrate into the worldwide economy after more than a years of civil war. We expect GDP development to typical 9.6% over 2026-2027, supported by restored financial investment, especially in banking and energy, financial reforms, and the steady reopening of local trade links.

Future-Proofing Middle East Portfolios for 2026 Shifts

The World Bank has slashed its 2026 growth projection for Middle East economies, stating general GDP growth in the area is anticipated to slow from an estimated 3.6% in January to 1.8% for 2026. The closure of the tactical Strait of Hormuz, and damage of energy and public facilities, had actually interrupted markets, increased financial volatility, and compromised the 2026 growth outlook, the World Bank Group said in its Economic Update for the Middle East, North Africa, Afghanistan and Pakistan.

The April 2026 World Bank's Macro Poverty Outlook anticipates that the area's aggregate (leaving out the Iran) GDP growth will decrease to 1.8 percent in 2026, down from 4.0 percent approximated for 2025. The 2026 forecast has been downgraded by 2.4 portion points because the January projections, showing the adverse impacts of the continuous conflict.

Saudi Arabia: Projection was devalued by 1.2 portion points since January. Growth is now expected to slow from 4.3% in 2025 to 3.1% in 2026, keeping in mind that Saudi Arabia's outlook remains the strongest among Gulf economies. United Arab Emirates: Growth projection for the UAE has fallen by 2.7 portion points since January.

Qatar: Especially, development projection for the Qatari economy has actually seen a sharp decline of 11.0 percentage points given that January. The economy is now expected to record a contraction of 5.7%, below an estimated development of 5.3%, due to extreme blockage to melted gas supplies. Qatar is a crucial gamer in the global energy market, with a worldwide market share of melted natural gas (LNG) products ranging in between 20% and 21%.

Kuwait relies totally (100%) on the Strait of Hormuz to export its crude oil and derivatives. Consequently, closing the strait would imply a total shutdown of the country's monetary lifeline, right away halting revenue inflows to the state budget. Bahrain: Growth forecast for Bahrain's economy has actually declined by 1.8 percentage points because January.