Advancing Industrial Growth through Global Diversification

Threats are tilted to the downside. In the occasion of an extended conflict, the current effects on the area will be compoundedthrough raised energy and food prices, declining trade, tourism and remittances, increased fiscal pressures, and displacement. "The present crisis is a plain pointer of the work ahead for the region: not just to weather shocks, however to reconstruct more resilient economies with stronger macroeconomic principles, innovate and improve governance, purchase facilities, and boost employment-creating sectors," stated.

With peace and the ideal action, countries can develop the organizations, capabilities and competitive sectors that develop chances for individuals." With this long-lasting vision in mind, the report takes a close appearance at the region's potential for industrial policy federal government actions to increase tactical organization activity as a chauffeur of economic development and job creation.

ANSR July GCC PRs 50DR+

Federal governments in the area have actually adopted industrial policy at a high rate in the last years, frequently through sovereign wealth funds and state-owned enterprises, however the results have actually been blended. The report highlights the crucial need for strong organizations and cautious targeting of policies. "As countries deal with the heavy toll of today dispute, it is necessary to likewise not forget the work needed for lasting peace and prosperity," stated.

Advancing Economic Success through Global Diversification

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial forecast for the region prepared straight for the financing profession. The GCC economy deals with a significant contraction this year pending information of the US-Iran agreement to end the war. We expect energy flows, tourism and investor belief to gradually normalise as war interruptions go away.

ANSR July GCC PRs 50DR+

The interim contract in between the United States and Iran is a substantial step towards reaching a full-blown offer. A complete return to normality in the Strait of Hormuz will likely take some time, however the danger of a recession-inducing oil price spike has actually decreased. International GDP is anticipated to grow by 2.4% this year, 0.2 ppt less than we projected 3 months ago, and 3.1% in 2027.

We forecast a 4.1% contraction in Middle East GDP this year (versus projected 3.6% growth before the war), higher than the decrease in the first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stand out as the hardest struck, owing to their failure to avoid the disruption to regional shipping, war-driven facilities damage and tourism losses.

Our 2026 outlook for the GCC is weaker than three months earlier, with GDP projection to agreement by 2.4% compared to a 0.2% decrease projected previously. We anticipate Oman and Saudi Arabia to be the least adversely impacted by the fallout from the conflict, with both economies continuing to broaden this year.

The economic damage sustained in the last few months is considerable. Saudi GDP information for Q1 revealed development slowed to 3% y/y, with non-oil activities expanding by 2.9%, the weakest rate given 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 disruption hit late in the quarter.

2026 Investment Climate of the GCC

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

ANSR July GCC PRs 50DR+

We anticipate GCC oil sector output to contract by 14.5% this year, which will mark the steepest decrease in numerous decades. We then anticipate a 23.5% rebound next year, driven largely by normalisation from a badly depressed base. Oil rates have actually been volatile, relieving below $85 per barrel as the interim contract was announced.

In the medium term, we expect oil prices to be somewhat lower than our pre-war standard, as the UAE's departure from OPEC+ permits a gradual increase in its output towards the 5mn barrel per day production target when trade normalises. Against this background, the UAE will speed up the building of a new West-East pipeline that must double the capability of export through Fujairah.

The May PMI studies reported output growth reaching its strongest level in 3 months, driven largely by improved domestic need. They stay listed below long-run averages, with weak export orders and price pressures from higher material and transportation costs are a common style. 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 remainder of the years.