Doha, Qatar: The GCC economies are poised for stronger-than-expected growth this year, despite mounting global trade tensions and depressed oil prices, according to the latest ICAEW Economic Insight report for Q2, prepared by Oxford Economics. The report highlights upgraded regional forecasts, with GCC GDP now expected to expand by 4.4% in 2025, up from an earlier estimate of 4.0%.
While global GDP growth has been downgraded to 2.4% - the slowest pace since 2020 - the GCC is bucking the trend. This is being driven by a quicker rollback of OPEC+ production cuts, lifting oil-sector growth forecasts from 3.2% in March to 4.5%.
However, with Brent crude expected to average $67.3 p/b in 2025, the region faces mounting fiscal pressure. Only Qatar and the UAE are projected to maintain fiscal surpluses in 2025, highlighting the challenge of balancing growth ambitions with budget constraints.
The impact of the US 10% tariff on imports from GCC countries is expected to be limited given the region’s low US export exposure and the exemption of energy products.
Non-oil sectors in the GCC are forecast to grow 4.1% this year, supported by strong domestic demand, investment momentum, and diversification initiatives. The region is also favourably positioned to absorb any trade rebalances resulting from tariff headwinds and geopolitical tensions.
Saudi Arabia’s oil economy is now forecast to grow by 5.2% in 2025, up sharply from the 1.9% forecast in March, reflecting increased oil output and momentum. Production is averaging 9.7mn barrels per day, while non-oil sectors, led by construction and trade, continue to expand. In Q1 growth reached 3.4% y/y, driven by 4.9% expansion in non-oil activities in line with full year non-oil growth projection of 5.3%.
The rebasing of national accounts boosted the non-oil sector’s share of GDP, reinforcing the Kingdom’s diversification drive. However, weaker oil prices are expected to widen the fiscal deficit to 3.4% of GDP. With oil revenues down 18% y/y in Q1 and spending still rising, Saudi Arabia’s debt-to-GDP ratio is forecast to edge above 30% in 2025. Despite the risks, investor sentiment remains positive, with S&P recently upgrading the Kingdom’s credit rating to A+.
The UAE economy is forecast to grow 5.1% in 2025, driven by a recovery in oil output, a 4.7% rise in non-oil GDP, as well as deepening trade ties and enhanced market access. Tourism remains a key growth driver, with international visitor spending expected to contribute nearly 13% of GDP in 2025. In Q1, Dubai welcomed 5.3mn international visitors, up 3% y/y, consolidating its position as a leading tourism hub in line with the D33 agenda.
Hanadi Khalife, Head of Middle East, ICAEW, said: “The GCC economies are showing remarkable adaptability amid shifting global trade dynamics. Investments in tourism, technology, and infrastructure continue to pay dividends, strengthening resilience and laying the groundwork for long-term growth.”
Scott Livermore, ICAEW Economic Advisor, and Chief Economist and Managing Director, Oxford Economics Middle East, said: “We have upgraded our GCC forecast due to faster OPEC+ output increases and sustained non-oil momentum in key economies like Saudi Arabia and the UAE."
