Accelerating Non-Oil Growth via Global Diversification

Residential or commercial property rates have actually come under pressure after a duration of strong growth, with current information from the Dubai Land Department revealing a drop in home mortgage deals and cash sales. Nonetheless, we believe the risk of a lasting migrant outflow and a serious downturn in the genuine estate sector is low.

As a lasting US-Iran offer takes shape, the fallout from the conflict has actually tightened up local monetary conditions, exposing vulnerabilities through capital outflows, larger bond spreads, and weaker investor sentiment. A lot of GCC sovereigns carry relatively little debt and funding dangers are therefore restricted in the UAE, the central bank's liquidity management has actually alleviated immediate concerns.

That said, Bahrain has actually been able to rely on support from neighbours, including Saudi Arabia and the UAE, and it successfully raised $1bn from an oversubscribed sovereign bond sale this month, marking the first offering from the region considering that the war started. High-frequency fiscal information highlight the stress on regional public financial resources from the conflict.

ANSR July GCC PRs 50DR+

Advancing Economic Growth through Strategic Diversification

In Saudi Arabia, the spending plan deficit more than doubled to SAR125.7 bn, or about 9% of GDP in Q1, driven by a decrease in oil income and a surge in spending, particularly on subsidies, showing contingency outlays tied to the regional environment and an acceleration of Vision 2030 costs. In Qatar, the crisis brought oil and gas earnings to a stop, swelling the deficit spending to the biggest considering that 2017.

GCC inflation characteristics remain uneven, with food prices the primary source of upward pressure and inflation in this classification fortifying in Kuwait, Oman and Qatar. By contrast, food inflation stays reasonably subdued in Saudi Arabia, likely showing the mitigating result of its larger domestic food production base and higher supply-chain resilience.

We continue to see cost pressures as mainly temporal rather than indicative of a sustained inflationary cycle. Appropriately, we anticipate typical inflation to reduce to 2.1% y/y in 2027 as short-term supply-side pressures dissipate. With near-term inflation raised and transit through the Strait likely set to resume slowly, we anticipate the United States Federal Reserve to keep rate 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 three months ago). Oil production and exports, which offer essential profits and FX inflows, have actually been cut by the United States marine blockade, while non-oil activity has been significantly hit. In Iraq, oil exports have actually collapsed to a drip and we're forecasting 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 anticipate GDP development to average 9.6% over 2026-2027, supported by renewed investment, particularly in banking and energy, monetary reforms, and the steady resuming of local trade links.

The 2026 Business Climate of the GCC

The World Bank has slashed its 2026 development projection for Middle East economies, stating general GDP development in the region 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 disrupted markets, increased financial volatility, and damaged the 2026 growth outlook, the World Bank Group stated in its Economic Update for the Middle East, North Africa, Afghanistan and Pakistan.

The April 2026 World Bank's Macro Poverty Outlook forecasts that the area's aggregate (omitting the Iran) GDP growth will decelerate to 1.8 percent in 2026, below 4.0 percent approximated for 2025. The 2026 projection has actually been devalued by 2.4 portion points because the January forecasts, reflecting the negative effects of the continuous conflict.

Saudi Arabia: Projection was reduced by 1.2 portion points considering that January. Development is now expected to slow from 4.3% in 2025 to 3.1% in 2026, noting that Saudi Arabia's outlook stays the strongest amongst Gulf economies. United Arab Emirates: Growth projection for the UAE has actually fallen by 2.7 portion points since January.

Qatar: Notably, development forecast for the Qatari economy has seen a sharp decrease of 11.0 percentage points because January. The economy is now anticipated to record a contraction of 5.7%, below an estimated development of 5.3%, due to serious blockage to melted gas supplies. Qatar is a key gamer in the global energy market, with a worldwide market share of melted natural gas (LNG) materials ranging in between 20% and 21%.

Kuwait relies totally (100%) on the Strait of Hormuz to export its crude oil and derivatives. Closing the strait would indicate a total shutdown of the country's monetary lifeline, right away halting revenue inflows to the state spending plan. Bahrain: Development forecast for Bahrain's economy has decreased by 1.8 percentage points considering that January.