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Growth in the GCC is expected to withstand recent upheaval in global trade: The overall GCC economy is set to grow by 4.0% in 2025, up from an estimated 1.8% in 2024, despite rising global protectionism, geopolitical tensions, and an uncertain global economic outlook, according to the latest ICAEW Economic Insight report prepared by Oxford Economics.
The Kingdom will play a big role in GCC growth: Oil sector growth in the GCC is expected to reach 3.2% after two years of contraction, according to Oxford Economics. Saudi Arabia’s oil output is expected to reach 9.3 mn barrels per day during 2025 — up from its previous estimate of 9.1 mn barrels — driving an oil sector growth of 1.9%. Meanwhile, Saudi Arabia and the UAE are expected to lead non-oil sector growth in the region with 5.8% and 4.8% respectively.
As for our budget deficit, Oxford Economics sees the deficit coming in at 3.0% of GDP this year, driven by the government’s pursuit of “strategic investments.” This is less than forecasts from Fitch Ratings, which sees the budget widening to 3.8% of GDP, while Capital Economics predicts the deficit to widen to 4.0%.
Gov’t projections tell a different story: The government expects the budget shortfall to come in at 2.3% of GDP (SAR 101 bn) in the current fiscal year, and to “continue at similar levels over the medium term,” it said in its budget for FY 2025.
Tourism is going to be specifically prevalent in the Kingdom: “The tourism industry – the fastest-growing sector across the region in 2024 – will remain a vital engine for growth and diversification efforts,” the report said, adding that Saudi Arabia is expected to see growth in the sector over the next two years supported by “an expanded visa offering including the GCC-wide visa.”
ICYMI- Fitch Solutions’ research unit BMI sees MENA countries (and GCC countries in particular) being safe from direct tariffs from the Trump administration due to “economic and strategic considerations.” IBM argues that Saudi Arabia and the UAE’s investments in the US — specifically in AI — along with close relations with US President Donald Trump would make tariffs on both countries “counterproductive,” especially as Trump looks to “expand the Abraham Accords and reduce China's influence in the Middle East,” the report reads.
