The economy of the Arab region is gradually recovering and growth is expected at 3.7% in 2026

The report, issued under the title: “Macroeconomic Prospects in the Arab Region,” Growth trends in a global context characterized by heightened uncertainty as a result of increasing geopolitical turmoil and worsening financial pressures, which will hamper efforts to achieve sustainable and inclusive growth in the region.

The report indicated that inflation is likely to decline from 8.2% in 2025 to 5.4% by 2027, driven by the decline in commodity prices and the normalization of supply chains. The region’s overall exports are also expected to grow supported by an increase in non-oil exports.

Global tariffs

In this context, ESCWA Acting Executive Secretary Murad Wehbe said that this improvement is based on efforts to diversify economies, especially in high-income countries, implementing a number of financial reforms, and enhancing investment in non-hydrocarbon sectors.

But he warned that the Arab region “It remains highly vulnerable to risks arising from imbalances abroad, especially in light of continuing uncertainty regarding global tariffs and disruptions to regional trade.”

Variation in growth

The ESCWA report stated that expectations varied between groups of Arab countries, as the report expects high-income countries to achieve growth in gross domestic product from 3.3% in 2025 to 4.2% in 2026, with the support of economic diversification efforts.

As for middle-income countries, their growth is expected to rise from 2.8% in 2025 to 3.3% in 2026, with a subsequent gradual improvement despite the continuing challenges of debt and inflation. In contrast, low-income countries face severe financial and humanitarian pressures, with a limited recovery expected in 2026 and 2027 after a contraction of 0.9% in 2025.

The report called on Arab countries to continue diversifying their economies and reduce dependence on hydrocarbons, enhance investment in human capital, technology and digital transformation, improve public financial management and enhance local revenues, in addition to directing aid and investments in line with national priorities, especially in countries affected by conflicts, enhancing the flexibility of labor markets and creating sustainable job opportunities in light of accelerating technological transformations.

Reconstruction in Gaza

The report highlighted the humanitarian challenges in Gaza, where estimates indicate that the cost of reconstruction may reach about $70 billion, in light of the massive loss of life and the destruction of about 78% of the buildings.