Dubai's real GDP fell 2.3% y/y in the first half of 2026 to about AED473bn ($128.8bn), as the war in the Middle East hit the emirate's trade, transport and tourism, official data published on October 17 showed, Khaleej Times reported.
Wholesale and retail trade, the largest sector at 20.5% of output, shrank 6% and transport and storage 7.4%, while financial services grew 8.8% and health care 14.3%, according to the Dubai Data and Statistics Establishment. Real estate fell 2.5% and manufacturing 0.9%. In current prices GDP rose 0.2% to about AED505bn.
The contraction reverses first-quarter growth of 2.4% and implies a fall of about 6% y/y in the second quarter, Oxford Economics said in a note on October 21. Unlike the UAE as a whole, which grew 0.4% in the first half, Dubai has no oil output to fall back on as the region's main trade, aviation and tourism hub. Airport passenger numbers fell by nearly a third in the half, and the emirate drew 44.4% fewer international visitors in the first eight months than a year earlier.
The worst may be over. Air traffic recovered through the second quarter and the UAE purchasing managers' index held at 55.3 in September. "The stronger PMI readings suggest the trough has passed, but a full recovery in tourism and logistics hinges on shipping and air traffic normalising, which we don't expect until well into next year," Oxford Economics said. It forecasts UAE GDP will contract by 1.8% in 2026 before rebounding by 6% in 2027.
Iraq turns to the IMF
Iraq has asked the IMF for a new programme, and Managing Director Kristalina Georgieva promised to "support Iraq very firmly" with "both money and policy support", Bloomberg reported on October 17. The central bank devalued the dinar by 13% against the dollar earlier in October.
Oxford Economics forecasts Iraq's fiscal deficit will widen to almost 20% of GDP this year and public debt will jump from 56% to 83.5% of GDP. A programme could impose discipline after years in which abundant oil revenue let recurrent spending balloon, with conditions likely to target the public wage bill, non-oil revenue and reliance on central bank financing, it said.
Iraq's government debt and budget balance as a share of GDP, 2020-2027, with Oxford Economics' forecasts for 2026-2027. Source: Oxford Economics.
"Iraq's previous programmes had a mixed implementation record. The key question is whether the crisis will generate enough political support to address rigid recurrent spending rather than relying on another oil revenue recovery," Oxford Economics said. Tighter fiscal policy would also weigh on non-oil growth.