By George Pavel, Managing Director of Naga.com Middle East
The Gulf Cooperation Council (GCC) entered 2025 with a clearer dynamic known as the “non-oil economy driving growth alongside hydrocarbon production dual engine”: non-oil growth ensuring the majority of progress, while hydrocarbons remained limited by previously decided OPEC+ quotas. This pattern is particularly visible in the United Arab Emirates where, in the first quarter, the overall GDP grew by 3.9% year-on-year, with a 5.3% increase in the non-oil sector, which now represents 77% of the economy. Saudi Arabia and Qatar also showed strong non-oil momentum.
In the second half, the negative impact of oil should gradually diminish with the gradual dismantling of OPEC+’s voluntary cuts. This evolution preserves non-oil momentum while allowing the oil sector to positively contribute to GDP towards the end of 2025 and in 2026.
In 2026, overall growth is expected to re-accelerate, with the resumption of oil production adding to resilient domestic demand. The IMF now projects a 3.6% growth for Saudi Arabia in 2025 (3.4% excluding oil), then 3.9% in 2026, confirming the logic of the “dual engine.” The Central Bank of the United Arab Emirates forecasts a 4.9% growth in 2025 and 5.3% in 2026, driven by diversification in services, real estate, and industry. Qatar benefits from a distinct advantage: the North Field East project is expected to start production in mid-2026. The World Bank anticipates growth accelerating from 2.4% in 2025 to an average of 6.5% over 2026-2027 as LNG volumes increase.
The smaller economies of the GCC confirm this picture with clearer trajectories. Bahrain is expected to grow by 3.5% in 2025. Oman is projected to grow by 3.0% in 2025 and 3.7% in 2026, while Kuwait would rebound to 2.2% in 2025. Collectively, the bloc is moving towards a more predictable and investment-friendly base, where the non-oil economy drives growth alongside hydrocarbon production.
