GCC economy seen rebounding 8.1% in 2027 after conflict-driven contraction, says ICAEW
The GCC oil sector is forecast to shrink 14.5 per cent in 2026, marking the steepest decline in several decades, before rebounding 23.5 per cent in 2027 as production recovers from a depressed base
17 June, 2026
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Gulf economies are expected to rebound strongly in 2027 after a conflict-driven downturn this year, with gross domestic product across the Gulf Cooperation Council (GCC) forecast to grow 8.1 per cent as energy exports recover, travel demand returns and business confidence improves, according to a report published by ICAEW and Oxford Economics.
The report forecasts GCC GDP will contract 2.4 per cent in 2026 as ongoing regional conflict disrupts energy exports, tourism and investment activity.
The projections are based on a baseline scenario that assumes a ceasefire agreement is reached by the end of July and that the Strait of Hormuz returns to normal operations by year-end.
The report noted that a US-Iran framework agreement has since been announced, with a formal signing scheduled for June 19 in Switzerland, a development it said was broadly consistent with its baseline scenario.
The GCC oil sector is forecast to shrink 14.5 per cent in 2026, marking the steepest decline in several decades, before rebounding 23.5 per cent in 2027 as production recovers from a depressed base.
Least affected GCC economies this year
Saudi Arabia and Oman are expected to be the least affected GCC economies this year, with both forecast to continue growing despite regional disruptions.
Saudi Arabia and the UAE have been able to reroute part of their energy exports through alternative pipelines, helping to cushion the impact relative to other producers in the region.
Brent crude prices are forecast to average $90 per barrel in 2026, according to the report.
While energy output has been hit, non-oil activity in Saudi Arabia and the UAE has remained relatively resilient.
Purchasing Managers’ Index surveys for May indicated output growth reached its strongest level in three months, supported by domestic demand.
Overall, non-energy sectors across the GCC are expected to contract 1.1 per cent in 2026 before returning to growth in 2027 and beyond.
Saudi Arabia’s economy grew 3 per cent year-on-year in the first quarter of 2026, according to the report, although oil-related activities fell 6.8 per cent quarter-on-quarter, following disruption to shipping through the Strait of Hormuz late in the quarter.
Non-oil activity rose 0.3 per cent, while government spending increased.
Tourism is expected to face a more prolonged recovery. The report projects inbound arrivals to the GCC will fall by around 30 per cent in 2026, resulting in tens of millions fewer visitors and tens of billions of dollars in lost spending across the region.
GCC spending on strategic sectors to continue
Despite the disruption, GCC governments are expected to maintain spending on strategic sectors including technology, healthcare and financial services.
Most Gulf states continue to have relatively low debt levels, while funding conditions remain stable, the report said.
Bahrain recently completed a $1bn sovereign bond issuance that was oversubscribed, the first such issuance from the region since the conflict began, indicating continued investor appetite for Gulf debt.
Inflationary pressures are also expected to remain contained. Consumer price inflation across the GCC is forecast to average 2.6 per cent in 2026, easing to 2.1 per cent in 2027 as temporary supply-side pressures fade.
“The scale of disruption this year has been significant, and the economic data reflects that clearly,” Hanadi Khalife, regional director for the Middle East, Africa and South Asia at ICAEW, said in a statement.
Azad Zangana, head of GCC macroeconomic analysis at Oxford Economics, said the economic damage from the conflict had been concentrated in energy, tourism and investment, but that the region remained well positioned for recovery as trade routes reopened and travel demand returned.
























