RIYADH: Business activity in Saudi Arabia and the UAE is poised for stronger momentum in the third quarter of 2026, driven by resilient domestic demand, improving regional trade conditions, and ongoing economic diversification efforts, according to Standard Chartered.
In its latest report, the financial institution said the Kingdom entered the second half of the year with solid underlying economic activity despite regional uncertainties, with point-of-sale transactions, a key indicator of consumer spending, rising 6 percent year-on-year in May, returning to levels seen in January.
Affirming the resilience of the Saudi economy, a report by the Organization for Economic Co-operation and Development published in June projected that the Kingdom’s gross domestic product is expected to expand by 3.2 percent this year, before accelerating to 4.3 percent in 2027.
These projections broadly align with the International Monetary Fund’s April forecasts, which put Saudi growth at 3.1 percent in 2026 and identified the Kingdom as among the least affected Gulf economies due to the regional conflict involving Iran. The IMF also raised its 2027 growth forecast to 4.5 percent, assuming energy production and transport normalize in the coming months.
“Saudi Arabia’s economy has continued to demonstrate resilience through a period of heightened regional uncertainty, reflecting the strength of domestic demand and the progress of the Kingdom’s diversification agenda,” said Mazen Bunyan, CEO and head of coverage for Saudi Arabia at Standard Chartered.
He added: “As regional conditions continue to improve, we expect this resilience to translate into stronger business momentum, creating further opportunities for investment and private sector growth during the second half of the year.”
A report released by the General Authority for Statistics last month revealed that the Kingdom’s gross domestic product expanded by 3 percent year on year in the first quarter of 2026, reflecting broad-based growth across all major economic activities. GASTAT added that both oil and non-oil activities in the country expanded by 2.9 percent annually in the first quarter, while government activities rose by 1.5 percent.
Standard Chartered identified sustained investment, the easing of inflationary pressures, and an improving labor market as the three main drivers for the anticipated pickup in momentum during the third quarter of the year.
The report further said regional trade dynamics are showing signs of recovery, as the partial reopening of the Strait of Hormuz has enabled a near-full recovery in Saudi oil exports, which is projected to provide additional tailwinds for trade and broader economic activity in the coming months.
“The combination of resilient domestic demand, continued investment and improving regional conditions is expected to support stronger business momentum through the third quarter, reinforcing Saudi Arabia’s progress in economic diversification and its position as a leading growth market,” added Standard Chartered.
Underscoring the growth of the Kingdom’s non-oil private sector, a crucial engine of the nation’s economic diversification efforts, a report by S&P Global revealed that the nation’s Purchasing Managers’ Index rose to 53.3 from 52.8, driven by stronger domestic demand and new orders.
UAE business activity outlook
Standard Chartered revealed that the UAE is also expected to witness strong business activity in the third quarter of the year, as regional tensions ease and focus shifts toward the speed and scale of the economic recovery in the Gulf Cooperation Council region.
Positive non-oil growth appears to be driven by domestic consumption and investment, while the external sector is expected to gradually recover as regional trade flows normalize, accoriding to the report.
The analysis comes after the UAE’s June S&P Global PMI reading remained above the 50 threshold, signalling continued expansion in non-oil activity even during the kinetic phase of the recent regional conflict.
Rola Abu Manneh, CEO, UAE, Middle East and Pakistan, at Standard Chartered, said that figure “reinforces the resilience of its non-oil economy and private sector activity through a period of regional uncertainty.”
She added: “Domestic consumption and investment continue to support growth, while the gradual recovery in external demand provides a more constructive outlook for the third quarter.”
Manneh said that these trends reflect the depth of the UAE’s economic fundamentals and its continued role as a hub for trade, investment and capital flows.
Softer oil prices, a recovery in the job market, and an acceleration in investment growth as governments in the region continue to focus on maintaining the diversification of trade corridors are expected to help maintain the country’s economic momentum.
The partial reopening of the Strait of Hormuz and the prior rerouting of oil exports have already translated into a near full recovery in the UAE’s oil exports, while regional oil exports are recovering at a more gradual pace, the report added.
