Accelerating Industrial Success through Strategic Diversification

Threats are slanted to the drawback. In case of a prolonged conflict, the current impacts on the region will be compoundedthrough elevated energy and food rates, declining trade, tourist and remittances, increased financial pressures, and displacement. "The present crisis is a plain pointer of the work ahead for the area: not just to weather shocks, however to rebuild more durable economies with more powerful macroeconomic principles, innovate and enhance governance, buy facilities, and enhance employment-creating sectors," stated.

With peace and the best action, countries can build the organizations, capabilities and competitive sectors that produce opportunities for people." With this long-term vision in mind, the report takes a close look at the region's capacity for commercial policy federal government actions to increase strategic service activity as a driver of financial development and job development.

ANSR July GCC PRs 50DR+

Governments in the area have adopted industrial policy at a high rate in the last years, typically through sovereign wealth funds and state-owned business, however the results have actually been mixed. The report highlights the vital requirement for strong institutions and mindful targeting of policies. "As nations face the heavy toll of today dispute, it is essential to likewise not forget the work required for long-lasting peace and success," said.

Accelerating Economic Success through Strategic Diversification

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly economic projection for the area prepared straight for the financing profession. The GCC economy deals with a significant contraction this year pending details of the US-Iran contract to end the war. We expect energy circulations, tourist and investor belief to slowly normalise as war disruptions decrease.

ANSR July GCC PRs 50DR+

The interim agreement between the US and Iran is a substantial step towards reaching a full-blown offer. A full return to normality in the Strait of Hormuz will likely take some time, but the risk of a recession-inducing oil rate spike has decreased. Worldwide GDP is anticipated to grow by 2.4% this year, 0.2 ppt less than we projected three months back, and 3.1% in 2027.

We anticipate a 4.1% contraction in Middle East GDP this year (versus forecasted 3.6% growth before the war), greater than the decline in the very first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stand out as the hardest hit, owing to their failure to prevent the disruption to local shipping, war-driven infrastructure damage and tourist losses.

Our 2026 outlook for the GCC is weaker than 3 months earlier, with GDP projection to agreement by 2.4% compared to a 0.2% decline forecasted previously. We expect Oman and Saudi Arabia to be the least negatively affected by the fallout from the conflict, with both economies continuing to broaden this year.

The financial damage sustained in the last couple of months is substantial. Saudi GDP information for Q1 revealed development slowed to 3% y/y, with non-oil activities broadening by 2.9%, the weakest speed considering that the Covid pandemic. On a seasonally changed basis, GDP contracted 1.2% q/q, driven by a 6.8% fall in oil activities as the Strait of Hormuz interruption struck late in the quarter.

Accelerating Industrial Success through Strategic Diversification

Aside from Oman, all GCC manufacturers as well as Iran and Iraq have suffered substantial oil and gas production losses given that the start of the dispute. May information show regional production nearly halved from pre-war levels, with the decline deepening relative to March and April. Rerouting efforts, consisting of by Saudi Arabia through the East-West Pipeline and the UAE through the Habshan-Fujairah pipeline, have helped avoid an even larger plunge in output.

ANSR July GCC PRs 50DR+

Nonetheless, we forecast GCC oil sector output to agreement by 14.5% this year, which will mark the steepest decline in several decades. We then expect a 23.5% rebound next year, driven mostly by normalisation from a seriously depressed base. On the other hand, oil rates have been volatile, alleviating below $85 per barrel as the interim arrangement was announced.

In the medium term, we expect oil prices to be slightly lower than our pre-war standard, as the UAE's departure from OPEC+ enables a gradual boost in its output towards the 5mn barrel daily production target when trade normalises. Versus this background, the UAE will speed up the construction of a brand-new West-East pipeline that must double the capacity of export through Fujairah.

The May PMI studies reported output development reaching its greatest level in 3 months, driven mostly by enhanced domestic need. Nevertheless, they remain below long-run averages, with weak export orders and cost pressures from higher product and transportation costs are a typical style. In general, we anticipate a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% development pre-war) and a progressive recovery over the rest of the decade.