Will Tourism Drag Delay GCC’s Recovery?

The Gulf’s economic story over the next couple of years is shaping up to be one of patience before progress.

According to ICAEW’s latest Economic Insight Q1 2026 report, prepared with Oxford Economics, the GCC region is likely to face a mild slowdown in the near term, with GDP expected to dip slightly by 0.2 percent in 2026. For businesses - especially SMEs - this may translate into a period of cautious spending, slower deal cycles, and a general wait-and-watch approach across sectors.

But this phase isn’t expected to last too long.

Looking a bit further ahead, the outlook improves significantly. Growth across the GCC is forecast to rebound strongly, reaching 8.5 percent in 2027. The recovery, however, won’t happen overnight. It will depend largely on how quickly current disruptions - particularly in energy markets and regional logistics - begin to ease.

What’s causing the slowdown?

Right now, much of the pressure comes from disruptions in energy markets. While oil prices have remained relatively high, limits on production and exports have held back overall performance. This has created an unusual situation where higher prices are helping revenues, but supply constraints are restricting growth.

For SMEs connected to energy supply chains or dependent on broader economic activity, this creates a mixed environment - some stability from prices, but uncertainty in volumes and demand.

A phased recovery is expected

The report suggests that when recovery begins, it will likely follow a sequence.

The energy sector is expected to bounce back first, with a projected growth of 18.2 percent in 2027 as production constraints ease. This could have a ripple effect across related industries - logistics, manufacturing, and services - many of which include SME players.

Other sectors, particularly tourism and travel, may take a bit longer to regain momentum. These industries are more sensitive to factors like accessibility, airspace conditions, and overall consumer sentiment. With airspace disruptions already impacting travel, international arrivals to the Middle East are expected to drop between 11 percent and 27 percent this year.

For small businesses in hospitality, retail, and tourism-linked services, this could mean a quieter year ahead before things pick up again.

Non-oil sectors hold steady - for now

Non-oil activity is expected to remain largely flat in 2026, growing by just 0.1 percent. However, there’s a stronger outlook for 2027, with growth projected to reach 6.4 percent as travel resumes and business confidence improves.

This is where ongoing diversification efforts across the GCC start to matter. Investments in sectors like technology, financial services, and healthcare are helping build alternative growth engines - something that’s particularly relevant for SMEs looking beyond traditional industries.

Government support will play a key role

On the fiscal side, governments across the region are expected to step in with increased spending to support economic stability. While some countries may benefit from higher oil revenues, others could feel pressure due to export limitations.

For SMEs, this could mean continued access to support measures, especially in priority sectors. In markets like the UAE, initiatives aimed at supporting small businesses and tourism are already helping to stabilise activity and maintain confidence.

What this means for SMEs

For small and medium businesses, the next year may require careful planning and flexibility. Growth opportunities may be limited in the short term, but the broader outlook remains positive.

The key takeaway is that the region’s fundamentals - diversification, policy reforms, and infrastructure - are still strong. As disruptions ease, these factors are expected to support a steady recovery.

For now, it’s less about rapid growth and more about staying resilient, managing costs, and being ready to move when the recovery gains pace.