UAE economy poised for ‘counterattack’ with 9.5% growth forecast in 2027

Dubai: The UAE economy is projected to rebound by 9.5 per cent in 2027 after contracting 1.6 per cent this year, according to the World Bank, as the Gulf economy prepares for a sharp recovery following the disruption caused by the conflict and the closure of the Strait of Hormuz.

The World Bank expects the GCC economy as a whole to contract 4.3 per cent in 2026 before rebounding 10.3 per cent in 2027, assuming disruptions ease from early next year.

The UAE is forecast to grow 9.5 per cent next year, while Qatar and Kuwait are projected to post much sharper rebounds of 26.7 per cent and 22 per cent respectively, following contractions of 20.9 per cent and 14.6 per cent in 2026.

The forecast, published in the World Bank’s latest From Divide to Opportunity: AI, Jobs, and Growth report on October 6, puts the UAE among the fastest-growing GCC economies next year.

UAE Minister of Tourism and Economy Abdullah bin Touq Al Marri told CNN's Becky Anderson the scale of the projected rebound needs to be understood in the context of output being pushed from one year into another.

“When you look at a rebound, you look at the rebound between four or five per cent. Well, there's nothing different defines the 10 per cent, for instance,” he said.

“This is coming from the World Bank. That's a counterattack. That's something which is, you know, you're taking off 2027 and 2026, and you're adding it on 2027, and you're growing that much, just as double as what you should supposed to grow in one year.”

Growth rebound

The World Bank forecasts UAE GDP growth of 6.2 per cent in 2025, followed by a 1.6 per cent contraction in 2026 and a 9.5 per cent expansion in 2027.

The sharp reversal reflects the exceptional disruption experienced by Gulf oil exporters this year.

The World Bank said the closure of the Strait of Hormuz has had a particularly severe impact on Gulf economies, unlike previous energy shocks that generally benefited oil exporters.

GCC economies are forecast to contract 4.3 per cent in 2026, compared with 4.5 per cent growth in 2025.

The UAE is nevertheless expected to maintain a fiscal surplus of 4.2 per cent of GDP this year, with a current-account surplus equivalent to 8.2 per cent of GDP.

Beyond oil

For the UAE, however, the minister said the significance of the rebound would depend on where the additional economic activity and investment are directed.

“If you take that kind of growth and say, ‘All right, it's going to go into advanced manufacturing, it's going to go into logistics, it's going to go into AI, it's going to go into robotics, it's going to go into productivity, and improve the productivity of an economy’, that's something massive,” Al Marri told CNN.

“That's where investments is really going to be, and that's UAE.”

The comments come as the World Bank highlights artificial intelligence as one of the region's longer-term opportunities, even as the immediate outlook remains dominated by conflict, energy and trade disruptions.

The UAE and Saudi Arabia are the only countries in the region ranked among the global top 25 for both AI model development and high-performance computing, according to the report.

The UAE has also climbed from 32nd in the Global AI Vibrancy Index in 2017 to eighth in 2024, while the country attracted about four AI-skilled workers for every 10,000 LinkedIn members in 2024, reversing a net outflow recorded in 2019.

AI opportunity

The World Bank estimates AI could improve productivity in between 13 per cent and 20 per cent of jobs across the region, while less than 10 per cent of jobs face near-term automation risk.

The report says the UAE has the broadest occupational footprint of AI use in the MENAAP region.

It also identifies the Gulf's computing capacity, the region's linguistic diversity and talent across middle-income economies as potential building blocks for a regional AI ecosystem.

Roberta Gatti, World Bank Group chief economist for the Middle East, North Africa, Afghanistan and Pakistan, said the region needed to build the capabilities required to benefit from the technology.

“The question is not whether AI will play a role in the region’s future, but whether countries can build the skills, infrastructure, and institutions needed to benefit from it,” she said.

Gulf shock

The UAE's projected rebound comes against a much weaker 2026 outlook for several neighbouring economies.

Qatar's GDP is forecast to contract 20.9 per cent this year before rebounding 26.7 per cent in 2027, while Kuwait is expected to shrink 14.6 per cent before expanding 22 per cent next year.

Saudi Arabia is forecast to contract 2 per cent in 2026 and grow 7.9 per cent in 2027. Bahrain is expected to contract 2.9 per cent this year before growing 4.2 per cent next year.

Oman is the exception, with the World Bank forecasting growth of 3.1 per cent in 2026 and 3.4 per cent in 2027.

For the GCC overall, the projected 10.3 per cent expansion next year largely reflects the restoration of oil production and exports rather than a sudden improvement in underlying productivity, the World Bank said.

Conflict cost

The regional outlook has deteriorated sharply because of the conflict that began in February and the resulting disruption to energy and transport routes.

The World Bank projects MENAAP — the Middle East, North Africa, Afghanistan and Pakistan region — will contract 2.1 per cent in 2026, compared with 3.3 per cent growth in 2025.

The closure of the Strait of Hormuz cut oil export volumes, while higher prices failed to compensate for the loss of volumes.

Gulf oil production fell from about 26 million barrels per day before the conflict to around 16 million barrels per day in March, according to the report.

The shock has also spread beyond energy. Tourism, aviation and logistics have been hit, while higher shipping costs have pushed up food prices across parts of the region.

By late August, arrivals in Abu Dhabi, Muscat and Riyadh had exceeded pre-conflict levels, while Dubai, Doha, Kuwait City and Manama had recovered substantially but remained below pre-conflict levels.

The World Bank cautioned, however, that transit and business travel may overstate the recovery in visitor spending in hub economies such as Dubai.

2027 test

The World Bank's baseline assumes that conflict-related disruptions continue through the end of 2026 and ease from early 2027.

That would allow the region to recover sharply, but the report warns that the rebound is not guaranteed. Damaged infrastructure, postponed investment and depleted fiscal buffers could continue to weigh on economies after the immediate shock fades.

For the UAE, Al Marri said the priority was to ensure the economy was ready to turn the projected rebound into longer-term productive growth.

“We are hoping for that kind of growth happening in 2027,” he said.

“Hope is as well that the thinking is behind it. We want to make sure that we churn the engines, and leave the engines running at a high speed when it comes to 2027. And we are ready for it, and we are ready for that counterattack.”