RIYADH: The Arab region’s economy is forecast to expand to $4 trillion in 2026, rising 5.6 percent from the previous year as 19 countries contribute to the growth, a new assessment showed.
According to the Arab Investment and Export Credit Guarantee Corp., known as Dhaman, regional output climbed 1.7 percent in 2025 to about $3.8 trillion, despite geopolitical tensions and uneven global conditions, as reported by the Emirates News Agency, WAM.
This economic output remained highly concentrated, with five nations, — Saudi Arabia, the UAE, and Egypt, as well as Algeria and Iraq — collectively accounting for nearly 73 percent of the regional total.
The outlook is underpinned by a guarded optimism that regional unrest may ease, the economic situation will improve, and the benefits of structural reforms and rising merchandise and service exports will materialize.
“The Corporation said that IMF forecasts show that Arab economic performance indicators were generally mixed during 2025 due to declining global oil prices, continued geopolitical risks in the region and mounting economic and social risks,” the WAM report stated.
It added: “The value of the Arab GDP, according to purchasing power parity, surged by 6.1 percent to exceed $9.8 trillion, and is expected to keep rising to exceed $10 trillion in 2026.”
However, GDP per capita saw a slight decline of 0.3 percent to $7,806 in 2025, contrasting with a 4 percent increase under purchasing power parity to over $20,000, highlighting the continued large disparity between oil-producing nations and lower-income countries.
On employment, the region’s average unemployment rate edged down to 9.4 percent in 2025, driven by improvements across all countries, and is forecast to fall further to 9.2 percent in 2026.
Inflation also showed signs of moderation, as the average consumer price inflation rate declined to around 10.3 percent in 2025, with a continued drop to 8.1 percent projected for 2026, following decreases in inflation rates across 16 Arab countries.
In currency markets, the average annual exchange rate of seven Arab currencies — Tunisia, Qatar, the UAE, Morocco, Algeria, Djibouti, and Syria — improved against the US dollar in 2025.
Six countries maintained stable currencies, while seven others saw their currencies decline against the dollar.
Fiscal indicators presented a more challenging picture. The combined virtual deficit of Arab budgets soared by 53 percent to roughly $95 billion in 2025, representing 2.5 percent of Arab GDP, heavily influenced by a 13 percent drop in average global oil prices to $69 per barrel.
This deficit is expected to dip slightly to $94.5 billion in 2026. Concurrently, debt metrics weakened, with the government debt-to-GDP ratio rising to 46.2 percent in 2025 and expected to exceed 47 percent in 2026.
The ratio of Arab external debt also increased significantly to about 54.6 percent of GDP, with a slight further rise to 54.7 percent projected for 2026.
The Arab current account surplus contracted sharply, falling by 47 percent to $63 billion in 2025, equivalent to 1.7 percent of GDP. It is forecast to decline precipitously to $41.5 billion, or just 1 percent of GDP, in 2026.
Amid these developments, the value of total investments in 14 Arab countries grew by 5.2 percent to around $864 billion in 2025, accounting for 27.3 percent of their collective GDP, with a projected rise of 5.4 percent to exceed $910 billion in 2026.
Furthermore, Arab foreign exchange reserves increased by 3.4 percent to approximately $1.2 trillion, sufficient to cover merchandise and service imports for about 5.6 months on average.
Reserves are projected to grow by another 2.5 percent in 2026, extending import coverage to 5.7 months.
