WASHINGTON, October 7, 2025: The World Bank has raised its economic growth forecast for 2025 across the region encompassing the Middle East, North Africa, Afghanistan and Pakistan, known collectively as MENAAP, citing stronger-than-expected activity in Gulf economies and resilient performance in non-oil sectors. According to the latest regional economic update released in Washington on Tuesday, the World Bank now expects gross domestic product in the MENAAP region to grow by 2.8 percent in 2025, up from its April estimate of 2.6 percent.
Regional economic outlook gains strength on improved Gulf and non-oil sector performance.
The revision follows a quicker-than-anticipated easing of oil production cuts among Gulf Cooperation Council (GCC) members and robust growth in diversified sectors such as manufacturing, trade and services. GCC economies, which include Saudi Arabia, the United Arab Emirates, Qatar, Kuwait, Bahrain and Oman, are projected to grow by 3.5 percent in 2025. The acceleration is attributed to increased oil output alongside continued momentum in non-oil industries, particularly in Saudi Arabia and the UAE, where investment programs and tourism recovery have supported domestic demand.
Oil-importing countries in the region are also expected to perform steadily, with average growth forecast at 3.7 percent in 2025. Economic activity in countries such as Egypt, Morocco and Jordan has been supported by gains in agriculture, manufacturing and tourism, as well as sustained public investment. However, growth among developing oil-exporting nations including Iran, Iraq, Libya and Algeria is expected to remain weak, with the group’s aggregate growth forecast at just 0.5 percent. The World Bank notes that these economies have been affected by reduced oil production volumes, limited fiscal buffers and disruptions stemming from political instability and armed conflict.
World Bank lowers 2026 forecast amid broader economic pressure
Iran’s economy is forecast to contract by 1.7 percent in 2025, a sharp revision from earlier projections. The contraction reflects a combination of external sanctions, falling crude exports and subdued performance in the non-oil economy. The downturn is expected to deepen in 2026, with output projected to decline by 2.8 percent. The World Bank’s report also highlights persistent challenges in conflict-affected parts of the region. Countries such as Syria, Yemen, Libya and the Palestinian territories continue to face severe economic disruptions, including damaged infrastructure, constrained fiscal capacity and population displacement.
These conditions have limited recovery prospects and contributed to a widening divergence in regional growth outcomes. Although the 2025 outlook has been revised upward, the World Bank has lowered its 2026 projection for the region to 3.3 percent, reflecting broader global economic pressures, elevated borrowing costs and continued geopolitical uncertainty. Labor market conditions remain fragile in many MENAAP countries, particularly among women and youth. Female labor force participation continues to lag behind global averages, while unemployment remains elevated in several economies, including Tunisia, Lebanon and Jordan.
Economic divergence grows between GCC and fragile states
The report underscores the need for structural reforms to improve productivity and expand private sector-led growth across the region. Policy areas identified for attention include business climate improvements, labor market efficiency, human capital development and fiscal sustainability. The World Bank’s latest economic forecast covers 16 countries and territories in the MENAAP region and is part of its semiannual effort to assess macroeconomic trends, risks and policy challenges across emerging markets.
The revised projections come at a time when global economic activity has slowed and volatility in commodity prices remains elevated. The World Bank emphasized the importance of policy coordination and targeted investments to safeguard recovery efforts and maintain fiscal stability in a challenging external environment, especially as geopolitical risks and uneven demand continue to pressure emerging markets. – By Content Syndication Services.