The Arab region’s economy is expected to reach $4 trillion in 2026, a 5.6% increase from the previous year, according to a new assessment by the Arab Investment and Export Credit Guarantee Corp. (Dhaman). The report indicates that regional output increased by 1.7% in 2025 to approximately $3.8 trillion, despite geopolitical instability and uneven global economic conditions.

Economic activity remains concentrated, with Saudi Arabia, the UAE, Egypt, Algeria, and Iraq accounting for nearly 73% of the regional GDP. Dhaman’s outlook signals cautious optimism that easing tensions, better macroeconomic conditions, structural reforms, and stronger exports could support further growth.

Citing IMF projections, WAM reported mixed prospects for 2025 as weaker oil prices, geopolitical risks, and rising economic pressures weigh on the outlook. GDP, measured by purchasing power parity, increased 6.1 percent to exceed $9.8 trillion and is expected to surpass $10 trillion in 2026.

GDP per capita slipped 0.3% to $7,806 in 2025, while per capita income by purchasing power parity increased 4% to more than $20,000, underscoring the wide gap between wealthier oil exporters and lower-income economies. Labor markets showed modest improvement, with the average unemployment rate declining to 9.4% in 2025 and projected to fall to 9.2% in 2026.

Inflation also eased, with regional consumer price growth dropping to about 10.3 percent in 2025 and expected to fall further to 8.1 percent in 2026 as inflation moderated in 16 Arab countries.

Currency performance varied: seven Arab currencies, including those of Tunisia, Qatar, the UAE, Morocco, Algeria, Djibouti, and Syria, appreciated against the US dollar in 2025. Six remained stable, while seven weakened.

Fiscal pressures increased. The collective budget deficit widened by 53 percent to approximately $ 95 billion in 2025, or 2.5 percent of GDP, largely due to a 13 percent decline in average global oil prices to $ 69 per barrel.

The deficit is expected to narrow slightly to $94.5 billion in 2026. Government debt rose to 46.2% of GDP in 2025 and is projected to exceed 47% in 2026. External debt also increased, reaching 54.6% of GDP, with a marginal rise expected next year.

The region’s current account surplus fell 47 percent to $63 billion in 2025 and is projected to decline to $41.5 billion in 2026, equivalent to just 1 percent of GDP. Despite this, investment across 14 Arab countries rose 5.2 percent to approximately $864 billion in 2025, representing 27.3 percent of their combined GDP, and is expected to surpass $910 billion in 2026.

Foreign exchange reserves also strengthened, rising 3.4 percent to approximately $ 1.2 trillion, equivalent to 5.6 months of imports. They are expected to grow another 2.5 percent in 2026, extending coverage to 5.7 months.