Gulf Arab states' solid macroeconomic and financial fundamentals will keep the region resilient in the face of global economic uncertainty, including a potential sustained drop in oil prices over the next few quarters. According to the International Monetary Fund (IMF), the members of the Gulf Cooperation Council (GCC) are expected to sustain solid economic growth over the next five years against the backdrop of low inflation and strong current account and external financial positions. Oil prices and production levels, particularly in the case of swing producers like Saudi Arabia and the United Arab Emirates, will continue to strongly contribute to economic growth, despite Gulf states' decades-long and ongoing efforts to diversify away from oil and gas production. Across the region, ongoing structural reform has helped increase the share of the non-hydrocarbon economy, though Kuwait, Qatar and Saudi Arabia remain highly reliant on oil and gas exports. By comparison, Bahrain and the United Arab Emirates have made greater progress toward diversification by developing their tourism, finance, logistics and manufacturing sectors, making their growth less sensitive to fluctuations in global hydrocarbon production and prices. But by international standards, all GCC economies remain highly susceptible to oil price volatility, especially prolonged downturns. A sustained decline in oil prices constrains government spending and often government investment, which in turn leads to slower near- and medium-term economic growth.

• The IMF expects the Gulf Arab region's real GDP to grow by 3.5-4% over the next few years, barring a major decline in hydrocarbon production and/or prices.
• GCC per capita incomes on a purchasing power parity basis vary significantly, ranging from extremely high levels in Qatar ($122,000) and the United Arab Emirates ($82,000) and high levels in Bahrain ($68,000) and Saudi Arabia ($62,000), to fair levels in Kuwait ($51,000) and Oman ($42,000). For comparison, U.S. per capita income is $75,000.
• Saudi Arabia is by far the largest GCC economy with a nominal gross GDP at market exchange rates of $1.1 trillion, compared to $550 billion in the United Arab Emirates, $220 billion in Qatar, $100 billion in Oman and $50 billion in Bahrain. For comparison, U.S. GDP is around $30 trillion.
• Most GCC countries enjoy significant economic and financial stability. Bahrain is the only Gulf country with a sub-investment sovereign rating by international rating agencies. Oman has a borderline investment rating, while Saudi Arabia, Qatar and the United Arab Emirates are all rated A or higher, implying a very low default risk.

GCC countries have enough fiscal and external buffers to counter the fallout from a worsening international economic climate, though a further decline in oil prices would still negatively affect their balance-of-payments and fiscal accounts. Global oil prices have remained above $60 per barrel year-to-date and are unlikely to fall much below this level for the rest of the year, barring a significant global economic downturn. With the exceptions of Saudi Arabia and Bahrain, all GCC countries are projected to maintain both fiscal and external surpluses under any realistic oil price scenario. All GCC nations (excluding Bahrain) have also accumulated large financial buffers to withstand even prolonged oil price weakness, including significant budget surpluses and large sovereign wealth funds. Any short-term budget shortfalls would thus have a limited impact due to existing budget surpluses, accumulated budget savings, or, in Saudi Arabia's case, a considerable ability to finance larger-than-anticipated budget deficits in the market. GCC central banks also have sufficiently large foreign-exchange reserves to maintain their dollar pegs. Additionally, GCC banking systems are well-capitalized, liquid and profitable so as not to be a significant source of contingent liabilities for their government or a source of significant macro risk. Large fiscal surpluses across most GCC countries (with the exceptions of Saudi Arabia and Bahrain) mean that a moderate dip in oil prices would only lead to reduced budget surpluses. This would result in somewhat lower economic growth, but no major changes to fiscal policy in the region. Only Bahrain is fiscally constrained, while Saudi Arabia could easily finance a budget shortfall by increasing government debt. And as in the past, if Bahrain got into trouble, it could count on the other GCC countries to provide financial support to avoid a broader financial, economic and political destabilization of the country. As a result, a financial crisis remains unlikely in any GCC country. But sustained lower oil prices would still increase pressure on governments to advance structural reforms, including economic diversification and tax reform, to make economic activity and financial performance less directly dependent on oil prices.

• The International Energy Agency projects global oil prices to average $69 per barrel this year, before declining to $58 in 2026 due to a substantial buildup of oil inventories worldwide. At the beginning of August, Brent crude was trading at $67 per barrel.
• The non-hydrocarbon sector continues to constitute a significant portion of the GCC's economic activity, ranging from 60-65% in Kuwait, Oman and Qatar; 75% in the United Arab Emirates and Saudi Arabia; and around 85% in Bahrain.
• Most GCC countries have effectively pegged their respective currencies to the U.S. dollar since the 1970s and 1980s. This policy, coupled with their central banks effectively mirroring U.S. Federal Reserve interest rate policy, has contributed to exchange rate stability and low inflation in the region.
• With the exception of Bahrain, public debt among GCC countries is low and manageable. By the end of the decade, public debt in Bahrain is projected to exceed 140% of GDP, while debt levels in all other GCC countries are projected to remain below a modest 40% of GDP.
• Saudi Arabia and Bahrain are the only GCC countries projected to run fiscal deficits in 2025-28. And only Saudi Arabia is projected to run a modest, if very manageable, current account deficit.

Saudi Arabia, the largest economy in the GCC, has shown significant resilience in the face of recent external shocks and will continue to do so, even if lower oil revenues force it to scale back costly government-led infrastructure investments. Non-hydrocarbon economic activity in Saudi Arabia has been expanding, driven by largely government-led investments geared toward economic development and diversification under Vision 2030. This expansion has coincided with sustained low inflation and record-low unemployment rates. The kingdom's external and fiscal buffers also remain significant, despite modest current and fiscal deficits. A sharp decline in global oil prices and output would negatively affect economic growth in Saudi Arabia, given its substantial spare oil production capacity and history of acting as a swing producer. However, the country's ability to run a counter-cyclical fiscal policy and sustain investment spending would mitigate the impact on economic growth, which is set to reach 3.5% in 2025 and 3.9% in 2026, per the IMF. It would take a massive drop in oil prices, which is unlikely, for Saudi economic growth to decelerate to 2024 levels of 1.8%.

• For Saudi Arabia, the IMF forecasts low consumer price inflation of around 2%, along with fiscal deficits of 4% or less, in 2025-26. The IMF also projects public debt to increase from a low 26% of GDP in 2024 to a modest 33% of GDP in 2026. Current account deficits will average 3% of GDP, but around half of the deficit is financed by foreign direct investment inflows. Saudi Arabia also remains a major net international creditor, sharply limiting any balance-of-payments or external debt-related vulnerabilities.
• Saudi Arabia's central bank holds net foreign assets exceeding $400 billion, which is more than adequate to maintain the peg to the dollar. The country's banking sector remains solid and is characterized by high capitalization and profitability, while nonperforming loans are near ten-year lows.

The outlook for the United Arab Emirates, the second-largest GCC economy, is very strong due to the country's greater economic diversification and its role as the regional business hub. The region's improving economic stability particularly benefits the United Arab Emirates due to its more diversified economy and historically superior growth potential compared to the other GCC economies. Against this backdrop, UAE economic growth is set to accelerate this year to reach 4%, up from last year's 3.8%, before accelerating to 5% next year. The country's fiscal balance will remain in substantial surplus at around 5% of GDP, while gross government debt will remain at a modest 30% of GDP. The United Arab Emirates' net international investment position will also continue to improve due to sustained large current account surpluses of nearly 10% of GDP.

• In June, Fitch Ratings affirmed the United Arab Emirates' sovereign foreign credit rating at AA-, citing resilient economic growth, moderate government debt and low break-even oil prices of $45-50 per barrel.

The outlook for the smaller GCC countries — Qatar, Kuwait, Oman and Bahrain — is slightly less favorable, but still fair. Inflation will average a modest 1-3% across all four countries in 2025 and 2026, while real GDP growth will average a solid 3-4% in 2025-26. Qatar, Kuwait and Bahrain are set to register real GDP growth of 1.9-2.5% in 2025, before accelerating to more than 3% in 2026. Oman, meanwhile, is predicted to see real GDP growth of 5-6% due to increased gas exports and especially transport-related services output (e.g., port, cargo and shipping). These growth forecasts are based on oil prices remaining around $67 per barrel, which is Brent crude's average price year-to-date. The stable inflation outlook in all four countries also means that growth-inflation dynamics, combined with ample fiscal flexibility, are unlikely to lead to increasing levels of domestic political discontent.