Most countries in the Gulf Cooperation Council (GCC) are expected to grow more slowly in 2025 than previously forecast Gulf Economies, according to a recent economic survey of the region. The slowdown comes despite plans by major oil producers to increase output. Analysts say the weaker-than-expected performance is due to falling oil prices, ongoing global economic challenges, and cautious business sentiment.
The GCC includes six major oil-producing countries: Saudi Arabia, the United Arab Emirates (UAE), Qatar, Kuwait, Oman, and Bahrain. Together, they play a major role in the global energy market and rely heavily on oil exports to fund their economies. While all six nations are working to diversify away from oil, current global conditions are making that transition more difficult in the short term.
Lower Growth Forecasts for 2025
Economists and financial institutions had expected a rebound in 2025, especially as the OPEC+ alliance (led by Saudi Arabia and Russia) is preparing to increase oil production starting mid-2025. However, the positive impact of this move is being reduced by weak global demand and lower oil prices.
Saudi Arabia, the region’s biggest economy, is now projected to grow at 3.9% in 2025—slightly below the earlier forecast of 4.0%. The UAE, often seen as the most diversified economy in the Gulf, is still expected to be the region’s fastest-growing country, but its outlook has also been lowered from 5.0% to 4.5%.
Growth expectations for Kuwait, Qatar, Oman, and Bahrain range from 2.5% to 2.8%, depending on how oil revenues and non-oil sectors perform through the year.
What’s Slowing the GCC Economies?
There are several reasons behind the slower growth outlook:
- Falling Oil Prices: Oil is the primary income source for most GCC countries. Prices have dropped significantly in recent months due to weak global demand, high interest rates in major economies, and concerns about a possible global slowdown. Even though OPEC+ plans to boost oil supply, the low price per barrel reduces revenue.
- Global Economic Uncertainty: Persistent inflation, rising borrowing costs, and tensions in global trade have led to cautious economic activity worldwide. This is affecting exports, foreign investment, and tourism—key areas for several Gulf nations trying to grow their non-oil economies.
- Delayed Reforms and Projects: Although several GCC countries have ambitious economic reform plans—such as Saudi Arabia’s Vision 2030 and the UAE’s push for tech and innovation—some projects are facing delays. Investors are waiting for clearer signals before committing more funds, especially with global uncertainty still high.
- Geopolitical Tensions: Regional tensions, including those in nearby areas such as the Red Sea and the Israel-Gaza conflict, have increased investor caution and placed pressure on trade and logistics, especially in maritime shipping lanes.
Non-Oil Sectors Offer Hope
One positive note for the region is the continued strength of non-oil sectors. Tourism, construction, logistics, financial services, and technology investments are helping diversify income sources.
For example, the UAE continues to attract tourists and foreign investors, with major events and real estate developments supporting growth. Saudi Arabia is also seeing growth in entertainment, infrastructure, and mining as part of its long-term economic strategy. These sectors are not completely immune to global shocks, but they offer more stability than oil revenues, which are highly volatile.
A recent report by the World Bank noted that non-oil sectors in the Gulf grew by 3.7% last year, thanks to government reforms and targeted investments. The trend is expected to continue in 2025, though at a cautious pace.
Inflation Under Control
Despite economic challenges, inflation remains under control in most Gulf countries. Prices are expected to rise between 1.2% and 2.5% across the region, which is considered relatively low. This helps maintain consumer spending and gives central banks room to support the economy if needed.
For instance, Oman is projected to have the lowest inflation at 1.2%, while Kuwait’s is forecast at 2.5%. Stable inflation rates can help attract foreign investors and keep living costs manageable for residents.
Country-Specific Outlook
- Saudi Arabia: The largest economy in the region is balancing oil production cuts and ambitious development goals. While oil revenues may fall short of expectations, continued investments in mega-projects like NEOM and expansions in the tourism sector are expected to provide support.
- United Arab Emirates (UAE): The UAE is in a strong position, with Dubai and Abu Dhabi continuing to lead in real estate, tourism, finance, and innovation. The country’s visa reforms and business-friendly environment have helped attract global talent and capital.
- Qatar: After the 2022 World Cup boost, Qatar is maintaining its focus on gas exports and infrastructure. Its economy remains stable, although growth will be moderate without the mega-event momentum.
- Kuwait: Political delays in economic reforms have slowed progress in Kuwait. While the country holds large oil reserves and a strong fiscal position, more action is needed to stimulate investment in other sectors.
- Oman and Bahrain: These smaller economies are working on debt management and economic reforms. While Oman has been successful in reducing its fiscal deficit, Bahrain’s outlook is more fragile due to higher debt levels and external financing needs.
The Big Picture
The slower growth forecast for 2025 does not mean the Gulf region is heading toward a crisis. Rather, it signals the need for continued economic reforms, diversification, and adaptation to a changing global environment. The transition away from oil dependency is complex and will take time, but the steps already taken—especially in the UAE and Saudi Arabia—are showing positive results.
While 2025 may be a year of modest growth, it could also be a year where long-term plans are tested and refined. Success will depend on how effectively each country manages its resources, attracts investment, and adapts to global economic shifts.
Final Thoughts
Gulf economies are entering 2025 with cautious optimism. The region still holds vast potential thanks to its resources, young populations, and strategic geographic position. However, the near-term picture will require careful navigation through oil market volatility, geopolitical risks, and global economic headwinds.
Leaders across the GCC are expected to double down on efforts to build more resilient economies that are less dependent on oil, more open to global trade, and better equipped for future challenges.
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