GCC enters 2026 in resilience mode -PwC

GCC economies are heading into 2026 with less focus on accelerating growth and more on sustaining it. After a year defined by diversification momentum and rapid digital buildout, governments are now recalibrating toward resilience as tighter global financial conditions, rising geopolitical risk, and softer oil prices reshape the outlook, according to PwC’s research platform Viewpoint. Governments are broadening trade ties, localising supply chains, and tightening fiscal discipline to navigate a lower-revenue environment.

A tighter grip on the government wallet

Budgeting for a USD 60 oil era: With crude prices expected to average at USD 55-60 / bbl, governments are tightening spending and becoming more selective in how capital is deployed. Funds are channeled toward projects that deliver clear economic returns, while subsidies are gradually scaled back to protect balance sheets without derailing national transformation agendas.

Privatization to bridge gaps: To ease pressure on public finances, governments are expanding the role of asset sales and public-private partnerships to finance and operate major infrastructure and utility projects. Simultaneously, non-oil revenue streams are being strengthened through more robust corporate tax and VAT frameworks, giving states greater insulation from oil market swings.

Rewiring global trade

Commercial diplomacy rising: As US-China tensions persist and global supply chains fragment, Gulf states are diversifying economic partnerships beyond their traditional allies. The region has adopted a strategy of “commercial diplomacy,” where trade agreements are frequently paired with investment packages to secure both market access and technology transfer.

Anchoring emerging corridors: This approach has pushed forward advanced trade negotiations with major economies including China, the European Union, and Asean. In parallel, the GCC is positioning itself as a central node in emerging trade corridors, including the India–Middle East–Europe Economic Corridor (IMEC), to facilitate East-West commercial flows.

Strategic mineral security

2026 will be a race for critical minerals: As industrial development and energy transitions efforts gather pace, access to critical minerals like lithium, copper, and rare earths is moving higher on the policy agenda. Sovereign investors and national champions, such as Saudi Arabia’s Ma’aden, are establishing joint ventures across Africa and Asia to secure upstream supply and reduce exposure to concentrated global value chains.

And localizing the value chain: Alongside overseas investments, GCC economies are ramping up domestic midstream refining and processing capacity. By 2026, new logistics infrastructure and deeper upstream partnerships are expected to position the region as a key bridge between African raw materials and global industrial demand.

AI goes operational

Commercial AI is set to unlock this year: After years of groundwork and with last year focused on resolving computing bottlenecks, AI is set to shift to real-world deployment. With new GPU capacity coming online in Saudi Arabia and the UAE, reliance on overseas data hosting is expected to decline, allowing sectors like finance, logistics, and energy to deploy AI models locally and at scale.

And the labor market is adapting: Governments are moving away from preserving legacy roles toward managing workforce transitions in an AI-enabled economy marked by weak productivity growth. Modular training, micro-credentials, apprenticeships, and targeted mid-career incentives are being rolled out to prepare workers for AI “translation roles.” New positions — including model operators and AI compliance specialists — are set to expand, helping automation lift efficiency while keeping the workforce competitive.

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MARKETS THIS MORNING-

Asia-Pacific markets are broadly in the red this morning. Early trading shows South Korea’s Kospi in the green, while Japan’s Nikkei, Hong Kong’s Hang Seng Index, China’s CSI 300, and the Shanghai index all down. This comes after Wall Street closed down overnight following remarks from US President Donald Trump that dividends and stock buybacks for defense companies will be suspended until they accelerate military equipment production, among other stipulations.

THE CLOSING BELL-

The ADX rose 0.5% yesterday on turnover of AED 1.2 bn. The index is up 0.6% YTD.

In the green: Abu Dhabi National Ins. Co. (+7.7%), Hayah Ins. Co. (+5.6%), and United Arab Bank (+4.0%).

In the red: Sudatel Telecommunications Group Co. (-6.0%), Phoenix Group (-3.0%), and Gulf Cement Co. (-3.0%).

Over on the DFM, the index rose 1.1% on turnover of AED 882.1 mn. Meanwhile, Nasdaq Dubai was up 1.2%.