DUBAI: Gulf economies are heading for a strong rebound in 2027 after the war tested their resilience, with years of reform and long-term investment helping maintain stability across the region, according to Jihad Azour, director of the Middle East and Central Asia Department at the International Monetary Fund.
Speaking to Arab News in a one-on-one interview at the launch of the IMF’s Regional Economic Outlook in Dubai, Azour pointed to Saudi Arabia’s Vision 2030, saying its reform-driven pillars have improved productivity and outperformed their targets, while the recalibrated strategy now focuses on sectors that improve productivity and increase resilience.
“I think the war showed how resilient the Saudi economy is,” he said, adding that long-term investment in infrastructure has helped maintain stability not only in the Kingdom, but also across the GCC.
He said this could foster greater integration among Gulf countries, which “could become, with time, a source of deeper markets and higher levels of growth.”
Gulf rebound
The outlook forecasts that GCC economies will contract by 4.8 percent in 2026, compared with the 2 percent growth expected in April, before rebounding by 9.1 percent in 2027. The IMF also says Saudi Arabia and the UAE have sizable buffers and could ease fiscal policy within a credible medium-term framework.
Azour said the projections rest on the assumption that the conflict will gradually end by the first quarter of 2027, with normalization by mid-2027.
“The big reason for this rebound is the normalization of exports of oil and gas,” he said. “Therefore, it’s a rebound that is mainly driven by the oil and gas sector.”
He added that oil and gas were the sectors most affected by the conflict due to a lack of export capacity, and would therefore recover faster. The non-oil sector, by contrast, saw a much smaller decline in 2026.
According to the report, oil production in directly affected Gulf exporters fell from 33 million barrels per day in February to about 19 million in May, with cumulative supply losses reaching 1.8 billion barrels by July, more than during the 1973 oil shock or the 1990 Gulf War.
Volumes over prices
The IMF projects the GCC current account surplus will shrink from 5 percent of gross domestic product in 2025 to 1.3 percent in 2026, even as it assumes oil will average $95.74 a barrel this year.
Asked whether export volumes now matter more than prices, Azour said: “Of course, because the price will not bring any revenues if it’s not matched by export volumes.”
Diversification and AI
With oil prices expected to ease toward $70 a barrel by 2031, Azour said the current period is an opportunity for Gulf countries to accelerate the diversification they began over the past two decades.
“The shock has revealed a certain number of issues to be addressed: connectivity, resilience, as well as building greater integration within the Gulf countries,” he said, describing these as key elements of a forward-looking strategy.
Qatar, Saudi Arabia and the UAE announced AI investments of about $120 billion in 2025, worth more than 5 percent of their GDP, according to the outlook. Azour said Gulf countries are already among the most advanced in the region in AI adoption and are getting close to advanced economies, drawing on the availability of energy, capital and human capital to grow the sector.
“If investments are done well, this could bring additional growth that could go up to 0.5 percent of GDP per year, which is substantial,” he said.
Egypt’s resilience
Egypt is projected to grow 5.1 percent, about one percentage point above the IMF’s April forecast. Azour said the country was able to protect itself from the external shock in 2026, thanks to exchange rate flexibility and policies adopted by the central bank. Egypt also improved public finance management and increased its primary surplus.