The World Bank has raised its 2025 growth forecast for the Middle East, North Africa, Afghanistan, and Pakistan (MENAAP) region, citing stronger economic performance in the Gulf states. The revised outlook now projects a 2.8% expansion in regional GDP, up from the 2.6% forecast made in April. This improvement reflects the faster easing of oil production cuts and the continued momentum of non-oil sectors across the Gulf economies.
Although the upgrade signals resilience, the broader regional picture remains uneven. Several economies outside the Gulf continue to struggle with structural and geopolitical challenges that limit growth potential.
Uneven Growth Across Oil Exporters
The World Bank cautioned that developing oil exporters are expected to face slower economic activity due to conflict-related disruptions and lower oil output. These challenges are likely to weigh heavily on employment, fiscal revenues, and investment inflows. Meanwhile, Gulf economies benefit from diversification efforts and rising domestic demand, helping offset weaker performance elsewhere in the region.
However, the report pointed to Iran’s worsening outlook as a significant drag. The country’s economy is now expected to contract by 1.7% in 2025 and shrink further by 2.8% in 2026 — a sharp reversal from the modest 0.7% growth predicted earlier this year.
Global Headwinds Temper 2026 Forecast
Despite the improved short-term outlook, the World Bank lowered its 2026 projection, warning that regional growth could decelerate amid tightening global financial conditions and continued political uncertainty. Elevated borrowing costs and weaker external demand are also expected to constrain investment and trade flows.
Ultimately, the report emphasizes that while Gulf economies are driving recovery across the region, sustained progress will depend on broader political stability, structural reforms, and the successful diversification of non-oil sectors.
