Arab Region Economic Recovery Projected at 3.7% Growth in 2026

The Arab region’s economy is on a gradual recovery path, with growth expected to accelerate to 3.7 percent in 2026, a marked gain from the 2.9 percent growth in 2025, according to a new report by the United Nations Economic and Social Commission for Western Asia (ESCWA). The report, titled Macroeconomic Outlook in the Arab Region , identifies a combination of economic diversification, fiscal reforms, and investment in non-hydrocarbon sectors as key drivers of the projected expansion. Regional inflation, which averaged 8.2 percent in 2025, is expected to ease to 5.4 percent by 2027 as commodity prices decline and supply chains stabilize. Despite positive momentum, ESCWA warns that geopolitical tensions and global trade disruptions remain significant risks to the outlook. The report specifically cites the spillover effects of conflicts in Gaza, Sudan, Yemen, and Syria, as well as tensions between Iran and Israel. These uncertainties continue to weigh on trade flows and investor confidence. In comparison, the World Bank’s latest update also projects regional GDP growth of around 3.3 percent in 2026 across the Middle East, North Africa, Afghanistan, and Pakistan, bolstered by stronger-than-expected performance in Gulf Cooperation Council (GCC) economies and some developing oil importers. Economic Divergence Among Countries ESCWA’s analysis highlights widening disparities in growth prospects across different income groups: High-income GCC states such as Saudi Arabia and the UAE are expected to post more robust growth thanks to diversification into manufacturing, tourism, and digital sectors. Middle-income countries face persistent challenges related to debt, inflation, and external shocks. Conflict-affected low-income nations including Somalia, Sudan, Syria, and Yemen continue to struggle, with GDP expected to contract before recovering modestly in 2026 if peace and reconstruction efforts begin. Saudi Arabia’s real GDP growth is forecast to average about 3.3 percent betw