Saudi growth downgraded, but still outruns GCC, economists say

Saudi Arabia is poised to be one of just two Gulf economies to grow this year, a Reuters poll of economists found, as the Kingdom’s East-West pipeline moves crude to the Red Sea and around the Strait of Hormuz — the chokepoint whose near-closure is dragging most of our neighbors into contraction.

Even so, the Kingdom’s growth forecast was cut to 1.4% from the 2.6% economists expected three months ago, coming in below the IMF’s revised 1.7% projection, itself down from 3.1% in April. Oman, the only other GCC economy projected to expand this year, saw its growth forecast upgraded to 3.1% from 2.2%, thanks to its primary export terminal sitting safely outside Hormuz.

But the near-term picture is far from settled. Estimates for Saudi growth this year run from a 4.3% contraction to a 4.1% expansion, a spread wide enough that Bank Audi group chief economist Marwan Barakat cautioned against taking any Gulf forecast at face value right now.

REMEMBER- The East-West pipeline already carries up to 7 mn bbl / d, roughly 2 mn bbl / d to domestic refineries and the remainder for exports. The Kingdom is weighing an expansion in preliminary talks with neighbors including Kuwait, Bahrain, and Qatar about adding 1-2 mn bbl / d, with a separate line for refined products also on the table.

Looking further: The economists expect a sharp 2027 rebound, with Saudi at 6.0% growth, but only if tensions ease and Hormuz shipping normalizes over the next six to 12 months.

Zooming out

Geography is drawing the line between who stays afloat in the Gulf. Kuwait and Qatar, both fully dependent on Hormuz, took the sharpest downgrades, each now seen contracting 8.1%, down from 4.4% and 6.0% in April. Bahrain is forecast to shrink 5.1% and the UAE 0.5%.

The problem for GCC producers isn’t the oil price — it’s the ability to ship. Crude has climbed nearly 20% this month to about USD 85 a barrel, but higher prices aren’t offsetting lost export volumes, costlier freight, and weaker investor confidence from the heightened risk.

Why it matters: The region’s diversification agendas are exposed to the same disruption. The tourism, logistics, finance, technology, and real estate sectors that Riyadh, Abu Dhabi, and Doha have pitched as a buffer against oil-price swings are vulnerable to grounded airspace, weaker travel demand, and delayed shipments. The larger risk may be less about another escalation than businesses permanently pricing in a higher geopolitical risk premium, Oxford Economics lead economist Akanksha Samdani said.