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UAE, GCC economies to bounce back in 2026-27 after slower growth in 2026: World Bank
After slowing down to 2.4 per cent in 2026, World Bank's latest research projects more than 4% growth for the UAE's economy over the next two years
- PUBLISHED: Thu 11 Jun 2026, 7:12 PM UPDATED: Thu 11 Jun 2026, 7:18 PM
The UAE and other GCC economies will bounce back over the next two years after slower growth in 2026 due to the Middle East war and the closure of the Strait of Hormuz, according to the World Bank.
The UAE's real GDP is projected to grow at 4.1 per cent and 4.2 per cent in 2027 and 2028, respectively, after slowing down to 2.4 per cent in 2026 as the Middle East war has impacted global growth.
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Data showed that the World Bank revised down the Gulf country's growth by 2.6 per cent and 1.0 per cent for 2026 and 2027, respectively.
“The conflict has taken a toll on global activity, but every crisis also brings an opportunity,” said Ayhan Kose, the World Bank Group's Deputy Chief Economist and Director of the Prospects Group.
“This moment should be used to strengthen policy frameworks, invest in infrastructure, accelerate business-enabling reforms, and mobilise private capital to support job creation at scale,” he said in the World Bank's Global Economic Prospects report.
The US and Israel launched attacks on Iran's political and military leadership on February 28. Tehran then targeted the UAE and other Gulf countries with missiles and drones. A fragile ceasefire has been in place for the past two months and talks are underway between the US and Iran.
In April 2026, the International Monetary Fund (IMF) projected that the UAE economy will grow by 3.1 per cent this year and 5.3 per cent in 2027, as the country's economy will be less impacted than other countries in the Gulf region.
“The contraction in GDP growth for 2026 is therefore more pronounced for Bahrain, Iran, Iraq, Kuwait, and Qatar, and less significant for Oman, Saudi Arabia, and the UAE. For all these economies, growth in 2027 is expected to rebound, based on the assumption that energy production and transportation will normalise over the next few months,” the IMF said in its latest World Economic Outlook report.
The UAE and other Gulf nations enjoy strong sovereign ratings on the back of huge sovereign wealth fund assets, reaching trillions of dollars.
In addition, alternative pipelines bypassing the Strait of Hormuz are also a credit positive for the country.
“Most GCC sovereign ratings are resilient to the war's effects due to very strong sovereign balance sheets backed by alternative export channels (Oman, Saudi Arabia and UAE/Abu Dhabi) or prospects of additional support (Bahrain),” according to Fitch Ratings.
The World Bank's Global Economic Prospects report also projected slower growth for the other Gulf countries this year, but stronger growth in 2027 and 2028.
The global institution revised down the overall Gulf Cooperation Council (GCC) countries' growth forecast by 3.1 per cent for 2026 to 1.3 per cent, but projected higher growth of 5.2 per cent and 4.0 per cent for 2027 and 2028, respectively.
