Photo Credit: Dhaman
Dubai, UAE — December 2025 — A new report from the Arab Investment & Export Credit Guarantee Corporation projected that the combined Gross Domestic Product of Arab nations will grow to approximately $4 trillion in 2026, signaling cautious economic optimism for the region.
The forecast, detailed in Dhaman’s fourth quarterly investment bulletin for 2025, anticipates a 5.6 percent growth in the Arab GDP next year.
This expected expansion is driven by projected economic growth in 19 Arab countries, including eight major oil economies that collectively contribute over 70 percent of the region’s total output, as reported by the Emirates News Agency.
The positive outlook comes alongside hopes for a reduction in regional unrest and continued benefits from structural reforms and export activities.
2025: A Year of Contrasts
The report highlighted a year of mixed economic performance in 2025. The nominal Arab GDP saw a modest increase of 1.7 percent, reaching about $3.8 trillion. Growth remained heavily concentrated, with Saudi Arabia, the UAE, Egypt, Algeria, and Iraq accounting for nearly 73 percent of the regional total.
However, several challenges persisted, including lower global oil prices, which averaged $69 per barrel—and ongoing geopolitical tensions. These factors contributed to a significant widening of the combined Arab budget deficit, which soared by 53 percent to roughly $95 billion.
Key Economic Indicators at a Glance:
- GDP (PPP): A more robust picture emerges when using purchasing power parity (PPP), with the Arab GDP reaching over $9.8 trillion in 2025, expected to surpass $10 trillion in 2026.
- Inflation & Unemployment: The regional average inflation rate declined to about 10.3 percent and is forecast to fall further to 8.1 percent in 2026. The unemployment rate also improved slightly to 9.4 percent, with a further drop to 9.2 percent expected.
- Investment: Total investment in 14 Arab countries rose by 5.2 percent to $864 billion in 2025 and is projected to exceed $910 billion in 2026.
- Debt & Reserves: Debt indicators showed some strain. The government debt-to-GDP ratio rose to 46.2 percent, while external debt jumped to 54.6 percent of GDP. Conversely, foreign exchange reserves grew by 3.4 percent to $1.2 trillion, sufficient to cover roughly 5.6 months of imports.
- Current Account: The Arab current account surplus contracted sharply by 47 percent to $63 billion in 2025 and is forecast to shrink further to $41.5 billion in 2026.
The report underscored a continued wide disparity between oil-producing and lower-income nations, reflected in a slight decline in nominal GDP per capita to $7,806, while the PPP-based figure exceeded $20,000.
