Arab GDP Expected To Increase To USD 4 Trillion By 2026 Amid Regional Challenges

The Arab Investment & Export Credit Guarantee Corporation (Dhaman) reported a 1.7% increase in the Arab GDP, reaching approximately US$3.8 trillion in 2025. This growth occurred despite regional geopolitical issues, with Saudi Arabia, UAE, Egypt, Algeria, and Iraq contributing nearly 73% of the region's total GDP.

According to Dhaman's fourth quarterly bulletin "Dhaman Al-Istithmar" for 2025, the economic outlook for Arab countries in 2026 appears positive. The GDP is expected to rise by 5.6%, reaching around US$4 trillion. This growth is anticipated across 19 Arab nations, including eight oil economies that contribute over 70% of the Arab GDP.

The International Monetary Fund (IMF) forecasts indicate mixed economic performance for the region in 2025 due to falling global oil prices and ongoing geopolitical risks. Despite these challenges, purchasing power parity saw a 6.1% increase in Arab GDP, surpassing US$9.8 trillion and projected to exceed US$10 trillion in 2026.

Unemployment rates in the Arab region decreased slightly to an average of 9.4% in 2025. This trend is expected to continue into 2026, with unemployment potentially dropping further to 9.2%. Inflation rates also fell across 16 Arab countries during this period, bringing the average consumer price inflation rate down to about 10.3%.

The average annual exchange rate of seven Arab currencies improved against the US dollar in 2025. However, six currencies remained stable while seven others declined against the dollar during the same year. Total investments in 14 Arab countries increased by 5.2%, reaching approximately US$864 billion in 2025.

This investment growth accounted for about 27.3% of these countries' GDPs and is expected to rise by another 5.4%, surpassing US$910 billion in 2026. Meanwhile, government debt indicators showed a slight increase, with debt-to-GDP ratios rising to about 46.2% in 2025 and projected to exceed 47% in the following year.

Fiscal Deficit and External Debt

The combined virtual deficit of Arab budgets surged by 53%, reaching roughly US$95 billion in 2025 due to a significant drop in global oil prices averaging US$69 per barrel that year. This deficit is expected to decrease slightly to US$94.5 billion by 2026.

Arab external debt also rose significantly, accounting for about 54.6% of the region's GDP during this period and anticipated to climb slightly higher to reach approximately 54.7% of GDP by next year.

Current Account Surplus and Reserves

The current account surplus for Arab nations plummeted by nearly half, dropping to US$63 billion or about 1.7% of GDP in 2025. It is forecasted to fall further to just US$41.5 billion or only around one percent of GDP by next year.

Despite these challenges, foreign exchange reserves increased by approximately three percent last year—reaching an estimated total value close enough at covering merchandise imports for roughly five-and-a-half months on average annually—and are predicted again rising another two-and-a-half percent throughout upcoming years ahead while extending import coverage slightly longer than before too!

With inputs from WAM