GCC set for stronger growth in 2026 as economies gain momentum

Economic growth across the Gulf Cooperation Council (GCC) is set to accelerate in 2026, with the region projected to outperform its 2025 performance despite muted oil revenues and ongoing global uncertainties. 

According to a new Oxford Economics research briefing, GCC GDP growth is expected to rise to 4.4 per cent in 2026, up from 4 per cent in 2025, reflecting a resilient non‑energy sector, strong consumer dynamics, and gradually improving oil output. 

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This improved outlook follows two years of softer‑than‑expected growth, during which oil production limits and volatile global economic conditions weighed on expansion. But the latest projections suggest that Gulf economies are now well‑positioned to regain momentum, buoyed by strengthening domestic demand and a broadly steady global backdrop. 

Consumers take centrestage

The report highlights GCC consumers as a major driver of the region’s economic performance heading into next year. Low inflation, robust labour markets, and growing real disposable incomes are expected to fuel a surge in consumer spending across the Gulf. With unemployment rates at exceptionally low levels and governments continuing to attract foreign direct investment through diversification strategies, consumer‑led activity is projected to be one of the standout themes of 2026. 

Credit growth is also forecast to remain elevated as access to financial services widens. With GCC central banks expected to follow anticipated US Federal Reserve rate cuts due to the region’s dollar pegs, borrowing costs are likely to decline, giving households and businesses further impetus to spend and invest.

Oil output to recover in second half of 2026

While the non‑oil sector continues to anchor the region’s resilience, the GCC’s hydrocarbon outlook presents a mixed picture. The report suggests the current Opec+ pause on oil output increases is likely to extend into the second quarter of 2026 due to excess global inventories and softer oil prices — forecast to fall below $60 per barrel early in the year. This could weigh on first‑half growth, particularly for economies more dependent on oil extraction. However, Oxford Economics projects a rebound later in 2026, with Opec+ members expected to resume raising production as inventories tighten and global demand improves. Qatar, meanwhile, stands out as a regional outperformer, with significant expansions in gas production and exports expected to lift its overall economic performance. 

Fiscal divergence across the region

As the GCC works to navigate lower‑than‑expected oil revenues, fiscal policy paths are set to diverge. Saudi Arabia’s 2026 budget anticipates a 6 per cent cut in capital expenditure as the kingdom aims to narrow its fiscal deficit by two percentage points. However, the report notes that these cuts may not materialise fully if counter‑cyclical spending measures are activated to support growth. 

By contrast, more diversified economies such as the UAE and Qatar are expected to continue advancing their development agendas. The UAE’s federal budget for 2026 includes a substantial 29 per cent increase in both spending and revenues, reflecting stronger non‑oil performance and a commitment to long‑term transformation efforts. 

A broad‑based recovery taking shape

Despite short‑term risks tied to oil prices and global demand, the GCC’s 2026 economic outlook is defined by strength in fundamentals: resilient consumers, robust non‑energy sectors, improving oil dynamics, and strategic fiscal planning. With these factors aligning, the region is preparing for one of its most balanced periods of expansion in recent years — anchored by a clear upward trajectory in GDP growth.  

Somshankar Bandyopadhyay

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somshankar@khaleejtimes.com

Somshankar Bandyopadhyay is a News Editor with close to three decades of experience. Currently, he manages the business section, ensuring that the top economic and business news of the day reaches its readers.