Regional Economic Outlook MENA - September 2025

The Middle East and North Africa (MENA) has navigated choppy waters over the past two years, but there is light on the horizon. Although the Gaza war is still raging, Israel has established ceasefire deals with Hezbollah and Iran, limiting the risk of regional escalation. Houthi attacks on ships along the Red Sea route and the Gulf of Aden are less frequent and more targeted than before. Oil production is reviving after a period of moderation since the oil market boom in 2022. And easing inflation and interest rate cuts will stimulate household spending across the region. As a result, real GDP growth in MENA is set to almost double, from 2.0% in 2024 to 3.3% in 2025 and 3.8% in 2026. However, the region remains divided, both in a geopolitical sense and in terms of economic growth potential. A possible failure of resumed negotiations on a nuclear deal with Iran could lead to renewed military intervention by Israel and the US, particularly given the uncertainty over Iran’s remaining nuclear capabilities and ambitions. On the economic front, oil-exporting and oil-importing countries face different challenges. Oil-exporting countries will have the wind in their sails. With oil production cuts being reversed, they will continue to invest in economic diversification. For them, the key question is whether this momentum can be sustained once oil prices decline further after 2027/28. In contrast, highly indebted oil-importing countries have limited fiscal space for growth-enhancing investments. Fiscal reforms are needed, but lingering social unrest stands in the way. 

MENA is poised for a remarkable economic resurgence – outpacing every other region in the world. Between 2024 and 2026, real GDP growth is projected to nearly double, reaching an impressive 3.8%. While this surge is largely tied to oil market dynamics, it also underscores MENA’s resilience to external shocks. The region has been least affected by global trade tensions and spillovers from conflict zones in its own backyard have remained contained.

In the Gulf Cooperation Council (GCC) countries, non-oil growth is robust and reform-driven, with Saudi Arabia and the UAE leading the bloc’s ambitious diversification efforts. Despite softer oil prices, governments have retained fiscal space for continued investment, supported by low public debt, sizeable sovereign wealth funds and ongoing efforts to mobilise non-oil revenue streams. The region’s reputation as a safe haven is undented by elevated regional turbulence. Rising levels of foreign direct investment provide an additional financial boost to its transformation agenda.

In contrast, energy-importing MENA economies are experiencing a more cyclical, consumption-led recovery, aided by lower oil prices, easing inflation and falling interest rates. However, investment is held back by limited fiscal space, macroeconomic imbalances and political uncertainty, while socioeconomic tensions hinder reform. Unlocking stronger growth requires growth-friendly fiscal reforms and stronger policy frameworks. Morocco offers a promising model, combining gradual fiscal consolidation with public-private partnerships to boost investment in strategic sectors. Egypt could follow suit by aligning IMF-backed macroeconomic stabilisation with an ambitious privatisation programme.
 

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For a complete overview of our outlook for the Middle East & North Africa and its efforts to boost resilience amidst rising global volatility, please download the full report available in the related documents section below.