Policy Papers

Despite the challenging external environment, the GCC economies have been resilient.
Non-hydrocarbon activity has remained robust amid strong domestic demand supported by the
reform momentum, limited spillovers from regional, as well as the modest direct impact of higher
U.S. tariffs given the exemption of energy products and limited trade ties with the U.S. While
external balances narrowed amid oil production cuts and robust imports, the external positions
remain overall strong.

The economic outlook remains favorable but risks are tilted to the downside amidst
elevated global uncertainty. Economic activity will be supported by the unwinding of oil
production cuts, the expansion of natural gas production, and strong reform and project
implementation facilitated by ample policy buffers. External buffers would remain comfortable
despite narrower current account balances driven by higher imports. The near-term risks to the
outlook are tilted to the downside, as oil prices could decline and financial conditions tighten
amid high uncertainty. Over the medium term, ongoing global structural shifts pose two-sided
risks for the GCC economies.