Accelerating Industrial Success through Global Diversification

Threats are slanted to the downside. In the event of an extended dispute, the present effects on the region will be compoundedthrough raised energy and food costs, declining trade, tourist and remittances, increased fiscal pressures, and displacement. "The existing crisis is a stark pointer of the work ahead for the area: not just to weather shocks, but to restore more resilient economies with more powerful macroeconomic fundamentals, innovate and improve governance, buy facilities, and increase employment-creating sectors," stated.

With peace and the best action, countries can build the organizations, abilities and competitive sectors that develop chances for people." With this long-term vision in mind, the report takes a close appearance at the region's capacity for industrial policy government actions to increase strategic company activity as a motorist of financial growth and task development.

ANSR July GCC PRs 50DR+

Federal governments in the region have adopted commercial policy at a high rate in the last decade, frequently through sovereign wealth funds and state-owned enterprises, but the results have been mixed. The report highlights the important need for strong organizations and cautious targeting of policies. "As countries face the heavy toll of today dispute, it is very important to likewise not forget the work required for lasting peace and prosperity," said.

Advancing Economic Growth via Strategic Diversification

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly economic projection for the region prepared directly for the financing profession. The GCC economy deals with a significant contraction this year pending details of the US-Iran agreement to end the war. We anticipate energy circulations, tourist and investor belief to gradually normalise as war disturbances go away.

ANSR July GCC PRs 50DR+

The interim agreement in between the United States and Iran is a considerable action towards reaching a full-blown offer. A complete return to normality in the Strait of Hormuz will likely require time, however the risk of a recession-inducing oil rate spike has actually decreased. Worldwide GDP is expected to grow by 2.4% this year, 0.2 ppt less than we forecasted 3 months ago, and 3.1% in 2027.

We forecast a 4.1% contraction in Middle East GDP this year (versus forecasted 3.6% growth before the war), greater than the decrease in the very first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stick out as the hardest struck, owing to their failure to prevent the disturbance to regional shipping, war-driven facilities damage and tourist losses.

Our 2026 outlook for the GCC is weaker than three months back, with GDP forecast to agreement by 2.4% compared to a 0.2% decrease forecasted previously. We expect Oman and Saudi Arabia to be the least negatively affected by the fallout from the conflict, with both economies continuing to expand this year.

The economic damage incurred in the last few months is significant. Saudi GDP data for Q1 showed growth slowed to 3% y/y, with non-oil activities broadening by 2.9%, the weakest speed considering that the Covid pandemic. On a seasonally changed basis, GDP contracted 1.2% q/q, driven by a 6.8% fall in oil activities as the Strait of Hormuz interruption hit late in the quarter.

Key Foreign Investment Prospects in the GCC Region

Aside from Oman, all GCC producers in addition to Iran and Iraq have suffered substantial oil and gas production losses since the start of the conflict. Might data show regional production almost cut in half from pre-war levels, with the decline deepening relative to March and April. Rerouting efforts, consisting of by Saudi Arabia through the East-West Pipeline and the UAE through the Habshan-Fujairah pipeline, have assisted avoid an even bigger plunge in output.

ANSR July GCC PRs 50DR+

Nonetheless, we forecast GCC oil sector output to agreement by 14.5% this year, which will mark the steepest decline in numerous years. We then expect a 23.5% rebound next year, driven largely by normalisation from a badly depressed base. On the other hand, oil costs have actually been unstable, easing below $85 per barrel as the interim arrangement was announced.

In the medium term, we expect oil costs to be slightly lower than our pre-war standard, as the UAE's departure from OPEC+ permits for a gradual boost in its output towards the 5mn barrel per day production target when trade normalises. Against this backdrop, the UAE will accelerate the building and construction of a brand-new West-East pipeline that need to double the capability of export through Fujairah.

The May PMI surveys reported output growth reaching its greatest level in three months, driven mostly by improved domestic demand. They remain below long-run averages, with weak export orders and price pressures from greater product and transport costs are a typical theme. Overall, we anticipate a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% growth pre-war) and a steady healing over the rest of the years.