Kuwait, Qatar and Bahrain face double-digit economic declines, while Oman remains the only GCC economy projected to grow
Riyadh: The International Monetary Fund (IMF) has forecast that the six economies of the Gulf Cooperation Council (GCC) will collectively contract by 4.8 percent in 2026, as the war involving Iran disrupts energy production, shipping, trade and broader economic activity across the region.
In its latest economic outlook, the IMF projected a sharp reversal from the Gulf bloc’s 4.5 percent economic growth in 2025. The 2026 forecast represents a 6.8-percentage-point downgrade from the 2 percent growth previously projected by the Fund in April.
The projected contraction is comparable to the 4.9 percent decline experienced by the GCC economies during the COVID-19 pandemic, according to the IMF’s October 22 announcement.
Kuwait, Qatar and Bahrain Face Deepest Declines
Kuwait is projected to suffer the steepest economic contraction among the six GCC members, with its gross domestic product (GDP) expected to decline by 16.7 percent in 2026.
Qatar’s economy is forecast to shrink by 15.6 percent, while Bahrain is expected to experience an 11.3 percent contraction.
The United Arab Emirates (UAE) is projected to record a 3.9 percent decline, while Saudi Arabia’s economy is expected to contract by 3.3 percent.
Oman is the only GCC member projected to register positive economic growth in 2026, with the IMF forecasting expansion of 4.1 percent.
Oil and Gas Production Hit by War
The conflict has inflicted significant damage on energy production and export activity across affected Gulf economies.
According to the IMF figures reported by The National, oil and gas production among Gulf exporters directly affected by the conflict fell from approximately 33 million barrels per day in February to around 19 million barrels per day in May.
Qatar’s output reportedly declined by as much as 86 percent, highlighting the scale of disruption facing one of the world’s leading liquefied natural gas exporters.
The impact has extended beyond the energy sector. Disruptions to shipping, tourism, trade and business confidence have also weighed on economic activity across the region.
However, there have been signs of partial recovery. The International Energy Agency reported that Gulf crude shipments had risen to more than 75 percent of pre-war levels by September, although the wider economic outlook remains uncertain.
IMF Warns of a Severe Economic Shock
Jihad Azour, director of the IMF’s Middle East and Central Asia Department, described the conflict as a “severe shock” and highlighted its impact on energy production, transportation, tourism, trade and economic confidence.
The Fund also warned that the conflict is weakening the Gulf’s financial position.
The GCC’s combined current-account surplus is projected to narrow to 1.3 percent of GDP in 2026, compared with 5 percent in 2025. Meanwhile, the bloc’s combined fiscal deficit is expected to widen to 2.3 percent of GDP, up from 0.8 percent last year.
The IMF also projects inflation in the Gulf bloc to rise to 2.7 percent in 2026.
These pressures could constrain government spending and investment at a time when regional economies face mounting demands to protect businesses, maintain employment and strengthen infrastructure.
Iraq Faces a Separate Economic Crisis
Outside the GCC, Iraq is also expected to suffer a severe economic contraction.
The IMF projects Iraq’s economy will shrink by approximately 16 percent in 2026, placing it among the region’s worst-affected economies.
Iraq’s dependence on oil revenues and its exposure to disruptions in regional energy production and transportation make the country particularly vulnerable to prolonged instability.
The IMF’s broader October outlook also projects a contraction across the Middle East and Central Asia region, reflecting the economic consequences of the conflict and the prolonged disruption of shipping through the Strait of Hormuz.
Gulf Economies Could Rebound in 2027
Despite the steep projected decline in 2026, the IMF expects the six GCC economies to rebound by 9.1 percent in 2027.
However, the forecast is conditional on an end to hostilities and the gradual resumption of shipping through the Strait of Hormuz in early 2027.
The waterway is a critical international energy transit route, and prolonged disruption could continue to restrict exports, increase transportation costs and undermine confidence in regional markets.
The anticipated rebound would represent a substantial improvement from the current outlook, but it would not necessarily erase the long-term economic damage caused by the conflict.
The IMF has warned that the consequences could persist beyond the immediate crisis, particularly if infrastructure damage, disrupted investment and weaker business confidence continue to weigh on growth.
Outlook Remains Dependent on Peace and Shipping Recovery
The IMF’s latest projections underscore the vulnerability of Gulf economies to prolonged regional conflict, despite their substantial financial resources and ongoing efforts to diversify beyond oil and gas.
For Kuwait, Qatar and Bahrain, the projected double-digit contractions represent an especially severe economic challenge. Saudi Arabia and the UAE are also expected to experience recessionary conditions, while Oman’s positive growth forecast sets it apart from its regional neighbours.
The outlook for 2027 will depend heavily on whether hostilities end and maritime trade returns towards normal levels.
Until then, the Gulf region faces the prospect of declining economic output, pressure on public finances and continuing uncertainty over energy exports and international trade.
Sources: International Monetary Fund, World Economic Outlook, October 2026; The National, October 22, 2026; Al Jazeera, October 13, 2026.