World Bank Cuts Gulf Growth Forecast to 1.3% in 2026

The World Bank sharply downgraded its growth projections for the Gulf region, warning that escalating geopolitical tensions in the Middle East are weighing heavily on economic prospects.

In its latest report on economic developments in the Middle East and North Africa, the institution said growth in the Gulf Cooperation Council is expected to slow to 1.3% in 2026, down from 4.4% in 2025, a decline of 3.1 percentage points.

The report also projects a broader slowdown across the Middle East, excluding Iran, where growth is forecast to drop from 4.0% in 2025 to 1.8% in 2026, significantly below the bank’s earlier estimates released in January.

According to the World Bank, the ongoing conflict has already inflicted “significant and immediate” economic losses across the region. Disruptions linked to the potential closure of the Strait of Hormuz, alongside damage to energy infrastructure and public utilities, have unsettled markets, heightened financial volatility, and weakened growth outlooks.

The report underscores that the conflict represents an additional shock to a region already grappling with structural challenges, including weak productivity growth, limited private-sector dynamism, and persistent labor market constraints.

Ousmane Dione, Vice President of the World Bank for the Middle East and North Africa, Afghanistan, and Pakistan, stressed the urgency of proactive policy responses. He noted that the challenge extends beyond absorbing shocks to rebuilding more resilient economies through stronger macroeconomic fundamentals, improved governance, and greater investment in infrastructure and job-creating sectors.

Echoing this view, Roberta Gatti highlighted the importance of maintaining a long-term focus on peace and prosperity, despite the immediate economic toll of the conflict.

The World Bank emphasized that sustainable development in the region ultimately hinges on stability, noting that peace and sound economic policies are essential for building competitive sectors and creating meaningful employment opportunities.