The World Bank expects the UAE economy to expand by 5 per cent in 2026, rising slightly to 5.1 per cent in 2027, according to its latest Global Economic Prospects report. The report notes that the global economy has proven more resilient than anticipated despite ongoing trade tensions and policy uncertainty.
Global growth is projected to remain broadly steady over the next two years, easing to 2.6% in 2026 before increasing to 2.7% in 2027. This represents an upward revision from the Bank’s June forecast, driven largely by better-than-expected growth in the United States, which accounts for around two-thirds of the 2026 revision. Nevertheless, the 2020s are on track to be the weakest decade for global growth since the 1960s.
Regional growth outlook
The World Bank projects that growth in Gulf Cooperation Council (GCC) states will reach 4.4% in 2026 and 4.6% in 2027. In the broader Middle East and North Africa, Afghanistan, and Pakistan (MENAP) region, growth is expected to rise to 3.6 per cent in 2026 and 3.9 per cent in 2027.
Global growth in 2025 was supported by a surge in trade ahead of policy changes and rapid adjustments in supply chains. However, these effects are expected to fade in 2026 as trade and domestic demand soften. Easing global financial conditions should help cushion the slowdown. Global inflation is projected to decline to 2.6% in 2026, supported by softer labour markets and lower energy prices. Growth is expected to recover in 2027 as trade flows adjust and policy uncertainty diminishes.
Outlook for developing and low-income economies
Growth in developing economies is projected to slow to 4 per cent in 2026, before edging up to 4.1 per cent in 2027, as trade tensions ease, commodity prices stabilise, financial conditions improve, and investment flows strengthen. Low-income countries are expected to see stronger growth, averaging 5.6 per cent over 2026–2027, supported by firming domestic demand, recovering exports, and moderating inflation.
Despite these gains, the report notes that per capita income in developing economies is projected to grow by just 3 per cent in 2026, about one percentage point below its average for the 2000–2019 period. At this pace, per capita income in these economies would reach only 12 per cent of the level in advanced economies, intensifying job-creation challenges as 1.2 billion young people are expected to enter the workforce over the next decade.
Policy priorities to sustain growth
The World Bank emphasises that addressing these challenges will require a comprehensive policy approach focused on three pillars: strengthening physical, digital, and human capital to improve productivity and employability; enhancing the business environment through policy credibility and regulatory certainty; and mobilising private capital to support investment.
In addition, developing economies must bolster fiscal sustainability, which has been strained by overlapping shocks, rising development needs, and higher debt-servicing costs. M. Ayhan Kose, Deputy Chief Economist and Director of the Bank’s Prospects Group, highlighted the importance of well-designed fiscal rules to stabilise debt, rebuild policy buffers, and improve resilience to shocks, noting that enforcement, credibility, and political commitment are crucial to their effectiveness.
