The economies of the Gulf Cooperation Council (GCC) are expected to return to growth in 2027 after a difficult year marked by conflict-related disruptions, according to a new analysis by the Institute of Chartered Accountants in England and Wales (ICAEW) and Oxford Economics.
The report forecasts GCC economic growth of 8.1 percent in 2027 following a projected contraction of 2.4 percent in 2026. Analysts said the recovery would be supported by a gradual normalization of energy exports, tourism activity and investor confidence as regional tensions ease.
The outlook assumes that the interim agreement between the United States and Iran develops into a lasting settlement, allowing shipping through the Strait of Hormuz to return to normal and reducing the risk of further disruptions to global energy markets.
The latest projections represent a significant downgrade from estimates issued before the conflict. Across the broader Middle East, gross domestic product is now expected to shrink by 4.1 percent in 2026, compared with an earlier forecast of 3.6 percent growth.
According to the report, Kuwait, Iran, Iraq and Qatar are likely to face some of the greatest economic challenges due to shipping disruptions, damage to infrastructure and declines in tourism.
“Pending details, the deal should pave the way to a gradual recovery of GCC exports, investor sentiment and tourism,” the report said. It added that while risks remain in the near term, the baseline outlook points to a strong recovery next year and beyond.
The forecast for 2026 is more pessimistic than projections from major international institutions, though expectations for 2027 are considerably stronger.
The International Monetary Fund expects GCC growth of 2 percent in 2026 and 4.8 percent in 2027 after lowering its earlier forecast. The World Bank projects growth of 1.3 percent in 2026 and 5.2 percent in 2027, citing weaker hydrocarbon output and disruptions to trade, investment, aviation and tourism as key factors behind the slowdown.
The ICAEW report estimates that oil-sector output across the GCC will decline by 14.5 percent this year, marking one of the sharpest drops in decades. Production is then expected to rebound by 23.5 percent in 2027 as exports recover and market conditions improve.
Regional oil production in May stood at nearly half of pre-conflict levels, although alternative export routes in Saudi Arabia and the UAE helped reduce the impact of disruptions.
The report also warned that non-energy sectors could contract by 1.1 percent in 2026, while tourist arrivals may fall by as much as 30 percent. Inflation, however, is expected to ease from 2.6 percent in 2026 to 2.1 percent in 2027, offering some relief to consumers and businesses as the region moves toward recovery.
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