Arab GDP to reach $4tn in 2026 as inflation and unemployment fall across region

Arab gross domestic product (GDP) increased by 1.7 per cent to reach roughly $3.8tn in 2025, despite ongoing geopolitical challenges, according to the Arab Investment and Export Credit Guarantee Corporation (Dhaman).

The region’s economic weight remains geographically concentrated, with Saudi Arabia, the UAE, Egypt, Algeria and Iraq accounting for nearly 73 per cent of total Arab GDP.

The Corporation said that economic performance forecasts for 2026 are generally positive. Arab GDP is expected to rise by 5.6 per cent to around $4tn, supported by anticipated growth in 19 Arab countries, including eight oil economies that contribute more than 70 per cent of the region’s GDP.

Arab GDP growth

This outlook is driven by expectations of easing regional unrest, improving economic conditions and rising benefits from structural reforms and merchandise and service exports.

Dhaman noted that International Monetary Fund forecasts indicate mixed performance across Arab economies in 2025 due to declining global oil prices, continued geopolitical risks and mounting economic and social pressures.

The value of Arab GDP based on purchasing power parity surged by 6.1 per cent to exceed $9.8tn in 2025 and is expected to surpass $10tn in 2026.

GDP per capita in Arab countries saw a slight decline of 0.3 per cent to $7,806 in 2025, despite a 4 per cent rise to exceed $20,000 when measured by purchasing power parity.

The Corporation highlighted the continuing disparity between oil-producing countries and lower-income economies.

Arab unemployment rates

The region’s average unemployment rate eased to 9.4 per cent in 2025, with expectations of a further decline to 9.2 per cent in 2026. Inflation also moved lower: consumer price inflation for the Arab region fell to around 10.3 per cent in 2025 and is projected to fall further to 8.1 per cent in 2026.

Currency performance varied across the region. 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 currencies remained stable, while seven others declined.

Arab government budgets came under pressure, with the combined virtual deficit rising by 53 per cent to roughly $95bn in 2025, equivalent to 2.5 per cent of regional GDP.

This was attributed to a 13 per cent fall in average global oil prices to $69 per barrel during the year. The deficit is expected to narrow slightly to $94.5bn in 2026.

Arab investments

Investment activity remained strong. Total investments in 14 Arab countries increased by 5.2 per cent to around $864bn in 2025—equivalent to 27.3 per cent of their GDP. These investments are forecast to grow by 5.4 per cent to exceed $910bn in 2026.

Debt indicators deteriorated further. Government debt-to-GDP ratios rose to 46.2 per cent in 2025 and are expected to exceed 47 per cent in 2026. External debt climbed to about 54.6 per cent of GDP in 2025 and is forecast to rise slightly to 54.7 per cent in 2026.

The Arab current account surplus dropped sharply by 47 per cent to $63bn in 2025, representing 1.7 per cent of GDP. It is expected to decline further to $41.5bn, representing 1 per cent of GDP, in 2026.

Foreign exchange reserves in the region improved by 3.4 per cent to approximately $1.2tn in 2025, enough to cover around 5.6 months of merchandise and service imports. Reserves are projected to rise by 2.5 per cent in 2026, with import coverage increasing slightly to 5.7 months.