GCC Growth Rate to Accelerate by 1% Till 2027

The International Monetary Fund (IMF) expects growth in the Gulf Arab states to accelerate by 1% annually over the current and next two years, thanks to the steps these countries have taken to diversify their economies and reduce their dependence on oil, which was previously the almost the sole source of revenue, Jihad Azour, Director of the IMF’s Middle East and Central Asia Department, said.

Taking part in a panel discussion entitled “Global and Regional Economic Developments and Prospects” which was organised by IMP in Riyadh, Azour said that despite the uncertainty, he expects economies to generally recover this year in most countries in the region.

“However, the improvement will be stronger in oil-exporting countries, particularly the Gulf states, where the IMF expects growth to increase by 1% this year and a similar rate in 2026,” he noted, and added that the recovery will be driven by the contribution of the non-oil sector.

Azour emphasised that the Gulf countries have benefited from diversifying their economies, which has helped them maintain growth rates ranging between 3% and 5% over the past three to four years.

“Reforms and the acceleration of transformation plans contributed to this growth, despite OPEC+ agreements to reduce oil exports, making the effects of regional unrest less visible for these countries,” he averred.

Azour downplayed the expected impact of the tariffs imposed by the Trump administration, noting that it would be limited in most countries. The tariffs would only amount to about 10%, and that trade with the US is limited, with oil and gas exempt from the tariffs, thus minimising the direct impact, he observed.

Non-oil Countries

Regarding non-oil producing countries in the region, Azour said that their impact on geopolitical developments, in addition to rising interest rates. He noted that the region has witnessed several shocks over the past 18 months that directly impacted Lebanon, Syria, the West Bank, and Gaza, leading to significant GDP losses exceeding 50% to 60%.

The impacts also extended to neighbouring countries such as Jordan and Egypt, noting that the Suez Canal lost approximately $7 billion in revenue in less than a year, while tourism revenues and job creation in Jordan also declined.

Azour explained that some countries were less affected by these developments, but the two main sources of uncertainty in the region remain global and regional developments.

He pointed out that some Arab countries, such as Lebanon, Jordan, and Morocco, were highly exposed to external factors such as remittances, tourism, and investment, making them indirectly vulnerable. He also noted that fluctuations in global financial markets have impacted the region, with higher risk levels compared to other emerging markets and widening yield differentials.

He predicted that non-oil economies would record an improvement compared to last year, but that this growth would be lower than forecasts six months ago, indicating the impact of uncertainty on recovery prospects in 2025 and 2026.

Azour pointed out that oil-importing countries facing high levels of debt must monitor interest rates, despite their recent improvement in financial conditions.

“Effective interest rates have doubled compared to what they were 10 years ago, imposing an additional burden on these countries, especially those with high financing needs, given market risks and tensions,” he added.