In our MENA Economic Outlook – October 2025, we look at the potential impact of increasing global trade frictions, shifting labour market strength, inflation and interest rates and the implications for several GCC economies' public finances.
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The growth outlook for the Gulf Cooperation Council (GCC) region is strong despite the backdrop of global headwinds. Economic activity is set to be supported by continued structural reforms and diversification efforts by governments. With continued plans to move away from oil dependency, through policies aimed at growing the size of the non-oil economy, the non-oil economy has seen its share of Gross Domestic Product (GDP) increase across the region.
Trade activity is set to provide additional support to the GCC’s growth outlook. The decision by GCC OPEC members to raise oil production will mechanically lift headline GDP by increasing export volumes, even if weaker oil prices dampen revenues. Beyond hydrocarbons, strong external demand for petrochemicals, metals, and transport services will also contribute to trade-driven growth. Importantly, the region has thus far avoided the worst of the trade frictions affecting other economies, with energy exports remaining exempt from US tariffs. Looking ahead, ongoing investments in ports, logistics, and free zones are expected to further integrate the GCC into global supply chains, strengthening its position as a hub for both east–west trade and non-oil exports.
Unemployment has declined to a record low across the GCC, reflecting stronger private sector activity and ongoing economic diversification efforts. The structural reforms undertaken under the region’s Vision programmes have also strengthened labour markets, particularly in Saudi Arabia. The fall in unemployment has also been accompanied by a rise in the participation rate, particularly among women.
The Federal Reserve began cutting interest rates in September 2025, and the GCC central banks have followed suit, easing their respective interest rates for the first time since the end of 2024.
Market expectations point to further interest rate cuts by the Federal Reserve over the coming year, that will likely see interest rates continue to fall across the region. However, interest rates remain firmly in restrictive territory and further easing will be needed to move rates closer to neutral levels.
The prevailing level of global oil prices remains a key driver of the economic outlook across GCC region. Recent evidence points to the global crude market being well supplied, as steady increases in oil production have led to a gradual accumulation of global crude inventories. Furthermore, demand conditions remain muted, with tariff announcements in April causing a sharp decline in oil prices to well below 2024 prices.
The outlook for oil prices has significant implications for public finances in the region, with prices expected to remain below the breakeven level necessary to achieve a balanced budget in half of the GCC economies.
GCC expected to feel lesser impact of global trade frictions and experience robust growth
Trade activity is set to provide additional support to the GCC’s growth outlook. The decision by GCC OPEC members to raise oil production will mechanically lift headline GDP by increasing export volumes, even if weaker oil prices dampen revenues. Beyond hydrocarbons, strong external demand for petrochemicals, metals, and transport services will also contribute to trade-driven growth. Importantly, the region has thus far avoided the worst of the trade frictions affecting other economies, with energy exports remaining exempt from US tariffs. Looking ahead, ongoing investments in ports, logistics, and free zones are expected to further integrate the GCC into global supply chains, strengthening its position as a hub for both east–west trade and non-oil exports.
Structural reforms and robust domestic demand set to drive further momentum in GCC labour markets
Unemployment has declined to a record low across the GCC, reflecting stronger private sector activity and ongoing economic diversification efforts. The structural reforms undertaken under the region’s Vision programmes have also strengthened labour markets, particularly in Saudi Arabia. The fall in unemployment has also been accompanied by a rise in the participation rate, particularly among women.
Interest rates are expected to fall further in the region over the coming year.
The Federal Reserve began cutting interest rates in September 2025, and the GCC central banks have followed suit, easing their respective interest rates for the first time since the end of 2024.
Market expectations point to further interest rate cuts by the Federal Reserve over the coming year, that will likely see interest rates continue to fall across the region. However, interest rates remain firmly in restrictive territory and further easing will be needed to move rates closer to neutral levels.
Oil prices expected to remain below their 2024 level, and below break-even levels for several GCC economies’ public finances
The prevailing level of global oil prices remains a key driver of the economic outlook across GCC region. Recent evidence points to the global crude market being well supplied, as steady increases in oil production have led to a gradual accumulation of global crude inventories. Furthermore, demand conditions remain muted, with tariff announcements in April causing a sharp decline in oil prices to well below 2024 prices.
The outlook for oil prices has significant implications for public finances in the region, with prices expected to remain below the breakeven level necessary to achieve a balanced budget in half of the GCC economies.
