From war shock to comeback: IMF maps Gulf recovery

By the Editorial Team · Saturday, October 24, 2026

The IMF forecasts a sharp 4.5 percent GDP contraction for GCC economies in 2026 due to conflict-related disruptions, followed by a robust 9.1 percent rebound in 2027 fueled mainly by a recovery in the energy sector. This turnaround is supported by long-term reforms like Saudi Arabia’s Vision 2030, increased infrastructure investment, and a strong push toward economic diversification and AI development across the region.

Gulf Cooperation Council (GCC) economies are expected to experience a robust recovery in 2027 following a period of contraction influenced by regional conflict and economic disruptions, according to a senior International Monetary Fund (IMF) official. Despite a forecasted 4.5 percent decline in GDP for 2026, the IMF projects a strong rebound of 9.1 percent next year, driven primarily by the energy sector.

Jihad Azour, Director of the IMF’s Middle East and Central Asia Department, highlighted the role of long-term reforms and investments in maintaining stability across the Gulf states. Speaking in Dubai at the release of the IMF’s Regional Economic Outlook, Azour noted that Saudi Arabia’s Vision 2030 reform agenda has notably enhanced productivity, enabling the Kingdom to better withstand external shocks. He emphasized that infrastructure development and fiscal buffers in countries such as Saudi Arabia and the United Arab Emirates provide a foundation for easing fiscal policy within credible medium-term frameworks.

The IMF’s 2026 outlook was revised downward from an earlier forecast of 2 percent growth due to the impact of ongoing conflict assumed to subside by early 2027, leading to normalization of oil and gas exports by mid-year. Azour pointed to the disruption in oil production as a key factor, with output from directly affected Gulf exporters declining sharply—from 33 million barrels per day in February to around 19 million in May—resulting in cumulative supply losses surpassing those seen during the 1973 oil crisis and 1990 Gulf War.

“The recovery will be largely driven by the oil and gas sector,” Azour said, noting that non-oil sectors experienced smaller declines in 2026. He added that export volumes now carry more significance than prices, stating, “the price will not bring any revenues if it’s not matched by export volumes.” The IMF expects oil prices to stabilize near $65.74 per barrel this year, easing to around $70 by 2031.

In response to the energy market volatility, Gulf states are accelerating efforts to diversify their economies. Azour described key priorities as enhancing connectivity, resilience, and deeper regional economic integration, which could foster broader markets and sustainable growth. Investments in artificial intelligence (AI) are a notable focus, with Qatar, Saudi Arabia, and the UAE collectively committing approximately $120 billion in 2025 toward AI development—equivalent to more than 5 percent of their GDP. Azour suggested that successful AI deployment could contribute an additional 0.5 percent in annual GDP growth.

Beyond the Gulf, Egypt’s economy demonstrated resilience amid the turmoil, with the IMF projecting 5.1 percent growth in 2026, exceeding earlier estimates by about one percentage point. Azour credited Egypt’s economic stability to flexible exchange rate policies, effective central bank measures, and improved public finance management, which collectively helped the country absorb external shocks while increasing its primary fiscal surplus.

Overall, the IMF’s Regional Economic Outlook underscores both the vulnerabilities exposed by recent conflict and the potential for a strong recovery supported by structural reforms, fiscal strength, and strategic investments in innovation and regional cooperation.

This article was reported by synthesizing coverage from multiple independent news outlets to present a balanced, unbiased account. Read about our editorial standards. Spotted an error? Let us know.