Beyond oil: GCC’s expanding trade agenda gains momentum

OPEC+ pauses further hikes as glut concerns grow 

In the months since our last report, OPEC+ has boosted production more rapidly than many oil market observers had expected. By September, the group had effectively restored the 2.2m barrels per day (b/d) in production that was ‘voluntarily’ removed from the market in January 2024 by eight countries – including Saudi Arabia, Iraq, the UAE, Kuwait and Oman. Other OPEC+ members, including Bahrain, continue to operate under the group-wide quotas that were last set in October 2022. 

The UAE was granted an extra 0.5 million b/d production, acknowledging its significant capacity growth during nearly a decade of output restraints. However, its current allocation remains nearly a third lower than its capacity – representing the largest relative shortfall of any OPEC+ member. Then in October, OPEC+ began to gradually taper the 1.6m b/d in voluntary cuts that were implemented in May 2023.

It’s worth noting that actual production often varies substantially from official quotas, with OPEC+ maintaining a compensation policy that requires countries, such as Iraq, to offset past overproduction.¹ As a result, although the average quotas of the eight countries rose by 2.7% year-on-year (y/y) during the first nine months of 2025, their actual production was only 0.7% higher, according to OPEC+ secondary source data.²

However, the International Energy Agency (IEA) estimates the production of Iraq and several other countries this year was substantially higher.³ The two notable exceptions were the UAE, where production rose 4.2% y/y in this period, supported by its additional allocations, and Saudi Arabia, where output climbed 3.3%, reflecting a rebound from its earlier, deeper voluntary cuts.

Looking ahead, the momentum is expected to strengthen. In Q4 2025, production from the eight countries is expected to be up by 7.9% y/y (2.4m b/d), driven by implementation of new production plans announced through early October.⁴ If Kazakhstan maintains its September production level of 1.84m b/d - around 0.3m b/d above its quota, then production could be up 9.1% y/y, as the country has consistently emphasised that it neither intends nor has the capacity to curb private sector output.⁵

On current plans, annual average production in 2026 will be up at least 3.6% y/y, and even higher if Kazakhstan maintains current production rather than implementing its substantial compensation pledges. The largest contribution in 2026 will come from the UAE, with output expected to rise by 7.4%.

_{Source: OPEC, PwC analysis; *Others: Algeria, Russia and Kazakhstan. In the “likely” scenario, Kazakhstan’s production remains at the September level through 2026}

The increased production by OPEC+ is one of several factors weighing on oil prices, along with strong production growth by non-OPEC+ countries in the Americas and growing concerns about weaker global demand. The IEA forecasts a nearly 4m b/d of excess supply in 2026.⁶ That said, there are geopolitical risks to supply, particularly expanded sanctions on Russia, as well as a potential recovery in industrial demand if trade uncertainty abates, which could temper oversupply concerns.⁷

On 17 October, the spot price for Brent crude dropped to US$60 for the first time since 2020. This compares with an average of US$71 for the first nine months of the year and $81 in 2024. Against this backdrop of softening prices and market uncertainty, OPEC+ has decided to pause further production increases in early 2026, delaying the restoration of the remaining 1.3m b/d of cuts until market conditions warrant a reassessment. 

The latest IMF forecasts are for fiscal deficits in 2026 – 3.7% of GDP for Saudi Arabia and 9.9% of GDP for Bahrain, assuming oil would be at US$66 per barrel, with surpluses for the UAE, Qatar and Oman. Kuwait is the outlier – its fiscal year begins in April and the IMF only sporadically publishes central government forecasts, but World Bank forecasts point to a deficit of 4.5% of GDP in 2026/27. Overall, GCC fiscal balance forecasts are projected to remain broadly similar to 2025, with higher output expected to partly offset weaker prices. However, if oil remains lower for longer, fiscal positions across the region are likely to come under renewed pressure, testing the resilience of spending plans and reform commitments.

Real economic growth remains robust

Higher oil production, irrespective of prices, provides a boost to real GDP growth. The OPEC+ tapering is the main reason why the International Monetary Fund (IMF) in October revised up its growth forecasts for most of the GCC, including lifting its forecast for Saudi growth to 4.0% in 2025 and 2026.⁸

However, the non-oil sector is also growing strongly in most countries. In the first half of the year (H1), Abu Dhabi led the GCC with 6.4% non-oil growth, while Qatar recorded 5.3% and Saudi Arabia 4.2%. Leading indicators in the second half of the year are also looking robust; for example, Saudi Arabia’s Riyad Bank Purchasing Managers’ Index (PMI) surged to 60.2 in October 2025 – the highest level since 2014 – driven by the fastest hiring growth in 16 years,⁹ while the UAE’s index stood 54.2 in September.¹⁰

Growth has been broad-based. Among the four GCC countries that had reported H1 GDP at the time of writing, nearly all sectors recorded positive performance, with only a few exceptions, such as communications in Qatar. In most cases, sectors expanded by at least 3% and several posted double-digit gains, such as hospitality in Oman which grew by 12.3%, while retail and wholesale trade in Qatar rose by 11.6%. 

In addition to country and sector-specific drivers, several common elements facilitated growth across the GCC. The easing of US interest rates stimulated credit growth, while low inflation, averaging only 1.5% across the region in the first seven months of the year helped sustain demand. Excluding rent increases in a few hotspots, particularly Riyadh and Dubai, consumer prices across much of the region were nearly flat. 

Elsewhere in the Middle East, performance was more mixed. Egypt’s economy grew by 4.9% y/y in H1 (calendar year), marking its best six-month performance since 2021. Reforms implemented since 2024, including currency depreciation, have boosted competitiveness and investment. This was despite the war in Gaza, which continued to hurt Suez Canal traffic and tourism. If the ceasefire negotiated in October can be sustained, then that should provide a boost not only to Palestine, but also to Egypt, Jordan and Lebanon.

Why it matters

While oil continues to play a central role in the GCC’s economic landscape, diversification efforts are clearly gaining momentum. The region’s non-oil sectors are proving increasingly dynamic and resilient, supported by investment, reform and expanding trade ties. Although the oil market remains inherently difficult to forecast – and a prolonged period of lower prices could weigh on fiscal positions – robust non-oil activity is helping to sustain growth and confidence across much of the GCC. Steady production levels may further cushion short-term pressures, while markets such as Dubai are demonstrating how diversification can meaningfully reduce exposure to oil cycles and underpin long-term economic stability.

_{Source: PwC analysis, National statistical authorities, IMF estimates and forecasts (WEO, Oct 2025) and for Lebanon and Palestine, World Bank (Oct 2025). *GDP: Q1 (UAE and Kuwait); Inflation: July (Kuwait). Fiscal forecasts for Kuwait including substantial off-budget income retained by sovereign funds.}

Chart of the quarter: Services drive the UAE’s current surplus to an 11-year high

The UAE’s current account surplus rose to 14.5% in 2024, the highest since 2013. This is a remarkable achievement during a year of modest oil prices, which highlights the extent to which the UAE’s economy has diversified over the last decade. 

Oil prices in 2024 were nearly 30% lower than in 2013, which is part of the reason why the trade surplus, traditionally the main driver of the UAE’s current account, was much lower, at only 12% of GDP, compared with 31% in 2013. However, the services balance was nearly as high, at a record 11.7% of GDP. By contrast, back in 2013, the services account had registered a 7% of GDP deficit. Most GCC states have a structure services deficit, as the UAE also did until 2019. 

The dramatic change – an improvement of 19% of GDP since 2013 – is a result of a surge in services exports, particularly travel and tourism, but also business and financial services. Meanwhile, the main drag on the current account remains remittance payments by migrant workers, the main component of the transfers balance, which registered a 12% of GDP deficit in 2024, on par with its level for several years. The final component of the current account, income from foreign investments, rose to a record 2.9% of GDP surplus, as the UAE’s stock of foreign assets grows.

_{Source: Central Bank of the UAE}