Middle East Key Themes 2025: Ahead of the race

We’re optimistic about GCC’s outlook for 2025 as oil production gradually increases, providing a boost to the region’s economies. OPEC+ decisions, a local pursuit towards diversification, the US Federal Reserve policy and geopolitics will remain central to the regional outlook.

In this report, we address five key questions shaping the GCC’s economic outlook for 2025:

• What will drive the GCC’s economic recovery in 2025? Our growth forecasts for the GCC have proved too optimistic for the second year in a row. GDP growth improved in 2024, but the OPEC+ agreement capping oil output remained in place. In 2025, we expect regional producers to keep oil output steady until H2, when the energy sector will return to growth after a two-year decline.
• What is the outlook for the non-energy sector? We think the non-energy economy will sustain a roughly 4% expansion in 2025. Strong domestic investment momentum will continue to support GCC non-energy sectors. Although we see no direct threat from the Trump administration’s tariffs, global trade fragmentation may intensify growth and diversification challenges.
• How will fiscal and monetary policies evolve amid changing economic conditions? Fiscal policies will remain accommodative despite ongoing revenue pressure. We expect a modest weakening in budget positions, with little change in the median debt-to-GDP ratio, and see regional countries maintaining their favourable credit ratings.
• What is the inflation outlook for the GCC? Strong demand for housing will sustain upward pressure on inflation in Saudi Arabia and the UAE. Monetary policy will be loosened, albeit with limited immediate benefit for regional economies.
• How will the Israel–Hamas war influence the GCC’s economic outlook? The ceasefire deal signed between Israel and Hezbollah at end-November marked an important step towards de-escalating the regional conflict. We think the regional conflict remains unresolved in the near term and see more redrawing of the regional geopolitical map, but with lower odds of major disruption to oil supply and escalation.

Download the full report to explore the full analysis.