Gulf economies shift from rapid expansion to ‘resilience mode’ as oil prices soften geopolitics bite – report
Gulf economies are placing more emphasis on economic recovery as low oil prices, tighter global financial conditions and regional tensions influence policy decisions heading into 2026, the PwC report said.
Oil-producing states across the Gulf Cooperation Council (GCC) are bracing for a tough financial situation next year, with global forecasts pointing to oil prices of around $55-60 a barrel.
While public debt levels in the region remain below those of many advanced economies, lower hydrocarbon revenues are prompting governments to adjust spending plans and strengthen non-oil revenue sources.
PwC said economic policy across the Gulf is focused on consolidation rather than isolation, as governments respond to an uncertain global environment marked by trade fragmentation and heightened competition across supply chains and technology.
“As we move into 2026, these changes sharpen the focus on sustainability rather than growth alone,” the report said.
Financial restructuring is expected to focus on prioritizing spending, monetizing assets and debt management, and efforts to strengthen non-oil revenue structures. PwC said governments are likely to target spending on projects with strong economic benefits, including digital infrastructure, logistics, industrial development and energy transition, while cutting spending in less profitable areas.
Key to private investment in the balance sheet
Private partnerships and private companies are expected to become more prominent as governments look to reduce pressure on public finances. PwC said assets in sectors including transport, utilities, water and waste management and non-essential energy services are likely to be awarded to private investors, with Saudi Arabia and the United Arab Emirates (UAE) identified as key markets for the project.
Borrowing is also expected to increase as governments run short of funds and strategic investment plans. PwC said sukuk-linked bonds and sustainability are likely to remain important financing tools, supported by recent upgrades to the credit ratings of Saudi Arabia, Oman and Kuwait, which should help maintain access to global capital markets.
The report said subsidy changes could be advanced in 2026. Subsidies for energy and utilities account for a large share of public spending across the region, and PwC said a wider price adjustment could be introduced, accompanied by targeted measures to support low-income households.
Income diversification remains a key objective. While major new tax measures appear unlikely, PwC said governments are expected to strengthen corporate tax and tax structures, improve compliance and expand the taxable base for digital and cross-border transactions. The UAE and Kuwait, which have introduced lower domestic surface taxes, are expected to start generating more stable non-oil revenues as a result.
PwC said 2026 will be an important year for financial management in the Gulf as governments continue major national development programs while adjusting to low oil prices.
“Success will depend on stimulating private investment, debt management and prioritizing long-term economic investment,” the report said.
