Today's Edition
A.SREEENIVASA REDDY (ABU DHABI)
Gulf Cooperation Council (GCC) economies are poised to sustain growth momentum in 2025 and 2026, even as global trade tensions and geopolitical uncertainties continue to weigh on investor sentiment, according to the latest Regional Economic Outlook of the International Monetary Fund (IMF). The report was released by Jihad Azour, Director, Middle East and Central Asia Department, IMF, at a press conference in Dubai on Thursday.
Azour, speaking at a roundtable organised by Dubai International Financial Centre (DIFC) to discuss the report, said, “The impact of global uncertainty on the GCC region is limited. The UAE will grow at 4% and will accelerate further next year. The same applies to Saudi Arabia. Oil exporting countries in the region are performing better than others in the region.”
The IMF notes that despite extended voluntary oil production cuts by OPEC+ and softer oil prices, most GCC countries have managed to uphold robust non-oil growth through domestic investment, diversification reforms, and strong consumer spending.
“Favourable oil prices, domestic investment by sovereign wealth funds, and ambitious reforms have supported private consumption and investment,” the report says.
Real GDP growth for the GCC region was 2.2% in 2024, with non-oil growth averaging 3.4% across the bloc. While this marked only a marginal improvement over 2023, the IMF underscores that “the impact of regional conflicts and Red Sea tensions was muted,” allowing trade, investment, and tourism to continue largely undisturbed.
Looking ahead, the IMF projects continued GDP growth for GCC countries, though at a slightly slower pace than previously expected. This is due to a more gradual recovery in oil production and downward revisions to non-oil activity, triggered by recalibrated investment plans amid softening oil prices. Nonetheless, the IMF affirms that “ongoing infrastructure projects and diversification efforts will continue to support non-oil growth.” GCC economies on aggregate are expected to grow at 4.2% in 2025 and 4.5% in 2026.
The UAE is projected to grow at 4% in 2025 and 5% in 2026, according to the revised outlook. The real GDP growth in 2024 in the UAE is put at 3.8%.
Fiscal consolidation remains a key priority. Non-oil primary deficits in the GCC have improved, and policy efforts are underway to enhance non-oil revenues through measures such as tax administration reforms and, in some cases, the proposed introduction of personal income tax.
“Non-oil fiscal balances are set to strengthen,” the IMF notes, attributing this to spending rationalisation and revenue-enhancing initiatives.
All GCC economies have attracted substantial FDI inflows since the pandemic, with aggregate FDI rising by nearly 2 percentage points of GDP. Amid ambitious diversification plans in GCC countries, sectors including manufacturing, transport and storage, and wholesale−retail trade have captured the largest inflows of FDI in recent years, representing more than 50% of total FDI deals “GCC countries stand out as a success story, having enacted business-friendly reforms and policy initiatives that attract and sustain FDI inflows,” the IMF report said.
Monetary policy is expected to remain aligned with the US Federal Reserve, given the currency pegs, while inflation remains anchored around 2%.
Despite narrowing current account surpluses due to lower oil prices and stronger domestic demand, the IMF reassures that “the GCC’s substantial external reserves and strengthened policy frameworks provide significant buffers against global uncertainty.”
