Arab Region’s Economy Expected to Reach $4 Trillion in 2026 as Growth Outlook Strengthens

The Arab region’s economy is projected to expand to $4 trillion in 2026, marking a 5.6 percent increase from the previous year as 19 countries contribute to a broadly improving economic landscape, according to a new assessment by the Arab Investment and Export Credit Guarantee Corp., known as Dhaman.

The report, cited by the Emirates News Agency (WAM), said regional output reached about $3.8 trillion in 2025, a 1.7 percent rise despite geopolitical tensions and uneven global economic conditions. Economic power remained heavily concentrated, with Saudi Arabia, the UAE, Egypt, Algeria and Iraq accounting for nearly 73 percent of total output.

Dhaman’s outlook is shaped by cautious optimism, driven by expectations that regional instability may ease, structural reforms will advance, and gains in merchandise and service exports will support national economies. However, the report noted that the International Monetary Fund’s forecasts for 2025 reflected mixed performance across Arab states due to weaker global oil prices, persistent geopolitical risks and broader economic pressures.

The region’s GDP based on purchasing power parity rose by 6.1 percent to surpass $9.8 trillion in 2025 and is forecast to exceed $10 trillion in 2026. Despite this expansion, GDP per capita declined slightly by 0.3 percent to $7,806 in 2025. By contrast, GDP per capita measured in purchasing power parity climbed to over $20,000, underscoring the significant divide between high-income oil producers and lower-income economies.

Labour market conditions improved modestly. The average unemployment rate declined to 9.4 percent in 2025 and is projected to fall to 9.2 percent in 2026. Inflation also eased across much of the region, with average consumer prices rising by 10.3 percent in 2025 and expected to slow further to 8.1 percent in 2026.

Currency markets showed mixed trends: seven Arab currencies — including those of Tunisia, Qatar, the UAE, Morocco, Algeria, Djibouti and Syria — strengthened against the US dollar in 2025. Six currencies remained stable, while seven weakened.

Fiscal pressures intensified during the year, as the combined deficit of Arab state budgets rose by 53 percent to nearly $95 billion in 2025, driven largely by a drop in global oil prices to an average of $69 per barrel. The deficit is projected to edge down slightly to $94.5 billion in 2026. Government debt levels continued to rise, reaching 46.2 percent of GDP in 2025 and forecast to exceed 47 percent in 2026. External debt also increased to 54.6 percent of GDP.

The region’s current account surplus narrowed sharply, falling by 47 percent to $63 billion in 2025 and expected to shrink further to $41.5 billion in 2026. Despite these pressures, total investments across 14 Arab countries grew by 5.2 percent to around $864 billion in 2025, with a projected increase to more than $910 billion in 2026.

Foreign exchange reserves strengthened as well, rising 3.4 percent to approximately $1.2 trillion in 2025 — enough to cover import needs for an average of 5.6 months. Reserves are expected to climb by an additional 2.5 percent in 2026, extending coverage to 5.7 months.