In its latest report, the Arab Monetary Fund (AMF) projected an improvement in economic growth across the Arab region for both 2025 and 2026, despite the expected slowdown in global economic activity for this year compared to last year..
The fund predicted the region’s economic activity to grow by 3.8% and 4.3% in 2025 and 2026, respectively, compared to a 2.2% reading in 2024.
The AMF attributes this optimistic outlook largely to Arab countries’ stronger macroeconomic indicators, positive impact of economic reforms, and the success of their diversification strategies.
Despite the heightened international trade tensions earlier this year, along with increased uncertainties and regional geopolitical escalations, the Arab world has successfully shown economic recovery from previous years.
The fund praised the region’s commitment to economic diversification, effective implementation of structural reforms, strengthening of fiscal sustainability, and improvements in international competitiveness.
According to the report, these efforts, alongside rising inflows of foreign direct investments, align with the long-term economic visions gor several Arab states, who aim to boost their position both regionally and globally.
GCC Economic Outlook: The Gulf states lead in numbers
The report predicts the Gulf states to witness a significant annual economic growth of 4% this year, compared with 2.2% last year, with a similar 4.4% predicted reading for next year.
The fund attributes this to several factors, including strong performance of non-oil sectors, which have seen a surge in infrastructure projects and economic diversification initiatives as of late.
It went on to state the limited possibility of the US latest trade tariffs affecting the economy of the Gulf region, especially with the energy sector being excluded from the tariffs. Additionally, the Gulf’s non-oil exports are minimally reliant on the US market. However, the report doesn’t dismiss the possibility of these countries witnessing non-direct effects of said tariffs, primarily due to the economic slowdown of many of their major economic partners affected by the latest imposed American tariffs, such as China, the Eurozone, and some developing Asian markets.
Positive economic outlook for oil-exporting states in 2025
Countries like Algeria, Iraq, Libya, and Yemen that are largely dependent on oil exports are expected by the AMF to record an annual economic growth rate of 3.3% in 2025 and 3.8% in 2026 for the following reasons:
● Economic revival in Libya.
● Growth momentum in Algeria.
● An investment-friendly environment and strong production activity.
As for oil-importing Arab states, the fund praised their overall monetary reform efforts, evident through their tax policy reforms, lowering public spending, and accommodative monetary policies—all of which are expected to drive greater economic stability.
Inflation is also to cool down
The average inflation rate of the Arab region is anticipated to be lowered to 20.8% this year, with it possibly reaching as low as 14.2%, compared to 2024’s inflation reading of 31.9%. If we exclude countries characterized by high inflationary pressures like Sudan, Syria, Lebanon, and Yemen, the region’s average inflation rate is expected to come at 7.6% for this year, compared to 5.6% last year.
The fund linked this anticipated inflation drop to a decrease in commodity prices, the positive impacts of many Arab countries’ monetary policies, and stable exchange rates in nations that experienced currency volatility in 2024.
