GCC economy forecast to rebound 8.1% in 2027: ICAEW

19/06/2026 01:42 AST

The Gulf Cooperation Council economy is forecast to rebound 8.1 percent in 2027 after contracting 2.4 percent in 2026, as regional energy exports, tourism and investor confidence gradually normalize following conflict-related disruptions, a new analysis showed.

The forecast, published by the Institute of Chartered Accountants in England and Wales in partnership with Oxford Economics, assumes an interim agreement between the US and Iran evolves into a lasting settlement, allowing traffic through the Strait of Hormuz to normalize and reducing the risk of a sharp oil-price shock.

The report marks a significant downgrade from forecasts issued before the conflict.

Middle East gross domestic product is now projected to contract 4.1 percent in 2026, compared with a 3.6 percent expansion forecast previously.

Kuwait, Iran, Iraq and Qatar are expected to be among the hardest-hit economies due to shipping disruptions, infrastructure damage and tourism losses, according to the report.

"Pending details, the deal should pave the way to a gradual recovery of GCC exports, investor sentiment and tourism," the report said, adding: "Although near-term risks remain, our baseline scenario still points to a pronounced recovery in regional growth next year and beyond."

The projection is more pessimistic for 2026, but substantially stronger for 2027, than forecasts from major multilateral institutions.

The International Monetary Fund expects GCC growth of 2 percent in 2026 and 4.8 percent in 2027, after cutting its 2026 forecast by 2.3 percentage points from its October projection.

The World Bank's June Global Economic Prospects report forecasts GCC growth of 1.3 percent in 2026 and 5.2 percent in 2027. It attributed the weaker near-term outlook to weaker hydrocarbon output and disruptions to trade, investment, tourism and aviation, while anticipating a rebound as conflict effects ease.

ICAEW expects GCC oil-sector output to fall 14.5 percent this year, the steepest decline in decades, before rebounding 23.5 percent in 2027.

Regional production in May was nearly half its pre-war level, although export routes in Saudi Arabia and the UAE helped prevent an even larger decline.

Non-energy sectors may contract 1.1 percent in 2026, while tourist arrivals could fall 30 percent. Inflation is expected to ease from 2.6 percent in 2026 to 2.1 percent in 2027.

Arab News