Gradual oil output hikes in the GCC region will generate oil-sector growth of 3.2 percent this year, following two years of contraction
In an environment of rising protectionism and persistent geopolitical tensions, the GCC region will remain resilient and is expected to register a GDP growth of 4 percent this year, broadly in line with the consensus and up from an estimated 1.8 percent in 2024. The strong growth in 2025 will be supported by an increase in oil production starting in April, which was confirmed by OPEC+ members recently.
However, the global economy’s outlook remains uncertain. The ICAEW recently cut its 2025 world GDP growth forecast by 0.2ppts to 2.6 percent. In the Middle East, GDP is expected to grow slower at 3.3 percent in 2025 amid uncertainty over external demand despite the region being out of President Trump’s direct tariff firing line.
GCC oil sector to grow 3.2 percent
Gradual oil output hikes in the GCC region will generate oil-sector growth of 3.2 percent this year, following two years of contraction. For Saudi Arabia specifically, the ICAEW now projects an average oil production of 9.3mn bpd for the year, up from our previous estimate of 9.1 mn bpd. This revision raises the oil sector growth forecast to 1.9 percent in 2025, compared to the earlier estimate of 1 percent.
The UAE will also benefit from a higher production quota of 3.5 mn bpd, supporting oil sector growth of 4.8 percent. Growth in the GCC oil sectors will likely pick up more strongly in 2026 as countries continue to raise supply.
Saudi Arabia’s non-oil sector to grow 5.8 percent
Meanwhile, the outlook for the GCC’s non-oil sectors is for another year of strong growth as demand conditions in the region remain supportive of activity. Growth in Saudi Arabia and the UAE will likely outperform again, with expansion of 5.8 percent and 4.8 percent, respectively, thanks to a strong pipeline of infrastructure projects and private-sector development.
Trade will also continue to be a key growth driver, especially in the UAE, which has recently broadened market access and fostered collaboration through several more comprehensive economic partnership agreements. The UAE’s foreign trade reached a milestone in 2024, surpassing AED3 trillion for the first time.
Meanwhile, the enforcement of a 15 percent corporate tax rate on large multinationals in Oman, Qatar and the UAE aims to increase their compliance with global tax standards, while also supporting the revenue outlook.
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GCC inflation to remain at 2.3 percent in 2025
Amid strong GDP growth, the ICAEW’s aggregate GCC inflation projection for 2025 remains at 2.3 percent and it sees inflation stabilizing around 2 percent in the medium-term. Recent readings show inflation is below 1 percent in Bahrain, Oman and Qatar, while in Saudi Arabia, the region’s largest economy, inflation averaged 1.7 percent in 2024, driven almost exclusively by upward pressure from housing rents.
Housing prices are also pushing inflation up in Dubai, where inflation readings have hovered around 3 percent, but this is offset but much lower readings in other emirates. At 2.9 percent, Kuwait had the highest inflation rate in the region in 2024.
Policy easing by GCC central banks will now be slower against the backdrop of U.S. dollar-pegged currencies. The Federal Reserve delivered a cumulative 100 basis points of cuts in 2024 before pausing in January.
The institute now expects the Fed to hold policy steady until December when it expects a 25 basis-point rate cut. This is down from its previous forecast of three rate cuts this year.
