GCC economic growth projected at 4.4% despite trade tensions

18/06/2025 04:10 AST

GCC economies are set for stronger-than-expected growth this year, despite rising global trade tensions and subdued oil prices, according to the latest ICAEW Economic Insight report for the second quarter, prepared by Oxford Economics.

The report highlights upgraded regional forecasts, with the GCC region's GDP now expected to expand by 4.4% in 2025, up from a previous estimate of 4.0%.

While global GDP growth has been downgraded to 2.4% - the slowest pace since 2020 - the GCC is bucking the trend. This resilience is being driven by a quicker rollback of OPEC+ production cuts, which has lifted oil sector growth forecasts from 3.2% in March to 4.5%.

However, the ICAEW report noted that with Brent crude expected to average $67.30 per barrel in 2025, the GCC faces increasing fiscal pressures. Only Qatar and the UAE are projected to maintain fiscal surpluses in 2025, underscoring the challenge of balancing growth ambitions with budget constraints.

The report also stated that the impact of the 10% US tariff on imports from GCC countries is expected to be limited, given the region's relatively low export exposure to the US and the exemption of energy products.

'Non-oil sectors in the GCC are forecast to grow 4.1% this year, supported by strong domestic demand, investment momentum, and diversification initiatives. The region is also well positioned to absorb any trade rebalancing resulting from tariff pressures and geopolitical tensions,' the report said.

In a press statement, Hanadi Khalife, Head of Middle East at ICAEW, said, "The GCC economies are showing remarkable adaptability amid shifting global trade dynamics. Investments in tourism, technology, and infrastructure continue to pay dividends, strengthening resilience and laying the groundwork for long-term growth."

Scott Livermore, ICAEW Economic Adviser and Chief Economist and Managing Director at Oxford Economics Middle East, added, "We have upgraded our GCC forecast due to faster OPEC+ output increases and sustained non-oil momentum in key economies like Saudi Arabia and the UAE. While uncertainty and trade shifts may place pressure on fiscal policy, the region's two leading economies are expected to continue progressing towards economic diversification and attracting global capital at an accelerated pace."

Saudi Arabia's oil economy is now forecast to grow by 5.2% in 2025, up sharply from 1.9% projected in March, reflecting increased oil output and economic momentum. Production is averaging 9.7mn barrels per day, while non-oil sectors - led by construction and trade -continue to expand.

The UAE economy is projected to grow by 5.1% in 2025, driven by a recovery in oil output, a 4.7% rise in non-oil GDP, deepening trade ties, and improved market access. Tourism remains a key driver, with international visitor spending expected to contribute nearly 13% of GDP in 2025.

Muscat Daily