More Oil Exports Help MENA Grow 2.7% in 2025

Growth in the Middle East and North Africa (MENA) region is projected to strengthen to 2.7% in 2025 and average 3.7% in 2026 and 4.1% in 2027, mainly due to an expansion of oil activity in oil exporting nations, which more than offsets the adverse effects of weakening external demand and lower oil prices, the World Bank said.

In the GCC region, growth is forecast to increase to 3.2% in 2025, 4.5% in 2026, and 4.8% in 2027. The phase-out of OPEC+ oil production cuts from April 2025 onwards is expected to lead to rising oil production, despite projected lower oil prices amid weakening global demand.

Growth is also anticipated to continue to be boosted by expanding non-oil activity, particularly in the manufacturing, construction, and services sectors, in several economies, including Bahrain, Kuwait, Oman, and the UAE.

In Saudi Arabia, growth is set to increase to 2.8% this year, reflecting a gradual expansion of oil production. However, the forecast for 2025 has been downgraded by 0.6 percentage point, mainly because of expected lower oil prices and fiscal revenues leading to lower export proceeds, as well as heightened uncertainty curbing investment, the World Bank said in its latest issue on Global Economic Prospects.

The World Bank also said that growth in oil importers is also expected to rise, reflecting an assumed stabilisation of armed conflicts in the region and waning inflationary pressures.

Despite firming activity, growth forecasts for MENA this year and next have been downgraded from January projections amid a rise in trade barriers. Moreover, weaker growth prospects will exacerbate the region’s looming jobs challenge, hindering the job creation needed to keep pace with rapidly expanding working-age populations.

Downside risks to the outlook stem from the possibility that global trade tensions escalate further, policy uncertainty remains elevated, or global financial conditions deteriorate, possibly driven by higher global inflation.

Also, lower-than-expected oil prices could adversely affect growth and fiscal revenue prospects in oil exporters, while a re-escalation of armed conflicts in the region could increase uncertainty and dampen growth, the report said.

External Positions Resilient

The World Bank said that the external positions of the GCC member-states have remained resilient. Growth of non-oil merchandise and services exports, including transportation and tourism, has been robust, mitigating the impact of reduced oil production on current accounts.

A worsening of goods trade balances has heightened external sector pressures in non-GCC oil exporters, particularly those implementing OPEC+ production adjustments, including Algeria and Iraq.

In oil importers, external pressures have eased, partly reflecting recoveries in tourism, spurred in part by moderating regional tensions.

Foreign exchange reserves in Egypt have continued to rise, supported by a one-off large-scale investment deal with the UAE, in addition to international financing. However, external accounts have continued to face pressure, as evidenced by the weak foreign asset position of commercial banks.

In addition, the increases in the US import tariff rates announced in early April have raised uncertainty about prospects for exports from the region.

Inflation has remained well-contained in GCC countries, partly aided by their fixed exchange rate regimes. Headline and core inflation have eased in non-GCC oil exporters, primarily because of tight monetary policies, albeit with still-elevated price pressures, in Iran, the report said.