The state of the Arab economy in the next phase

Observer

19-03-2025

Despite the wars and conflicts affecting Arab economies—especially the recent violent and destructive war in Gaza and other Arab countries—some economic indicators in the region continue to show remarkable growth. However, this progress is overshadowed by rising unemployment rates and increasing job layoffs across Arab nations.
The Arab Investment and Export Credit Guarantee Corporation reported that the Arab region's GDP grew by 1.8% last year, surpassing $3.5 trillion. This growth occurred despite numerous challenges, including ongoing conflicts in Gaza, Lebanon, and Syria, as well as external pressures on the Arab oil and gas sectors.
Recent data indicate that economic growth is concentrated in several key Arab countries, particularly Saudi Arabia, the UAE, Egypt, Iraq, and Algeria, which collectively account for over 72% of the region's total GDP.
Looking ahead, the Arab economy is expected to expand further, with a projected growth rate of 4.1% in 2025. This positive outlook is primarily driven by 14 Arab countries, including nine oil-producing economies, which contribute more than 78% of the region's GDP. The growth stems from improved revenues in the oil and gas sectors, as well as increased production of goods and services, despite external policies—such as those implemented by former U.S. President Donald Trump—that aimed to suppress oil prices and challenge Arab economic reliance on these industries.
According to the International Monetary Fund, Arab economic performance varied in the past year due to a 4% decline in crude oil production and a 1% drop in global oil prices. Additional factors impacting the region include the widening conflict in Gaza, Lebanon, Yemen, Syria, and Iraq, the ongoing war in Sudan, climate change, and rising external debt.
Despite these challenges, economic data show an improvement in per capita GDP across Arab countries, rising by 1.2% to $7,557 in 2024. Projections suggest a further 1% increase, bringing the average to $7,602 in 2025. When adjusted for purchasing power parity, per capita GDP rose by 2%, reaching approximately $19,000 in 2024. However, substantial economic disparities persist across the region.
The Arab region's population grew by 2%, surpassing 467 million in 2024. However, unemployment remains a pressing concern, with the average jobless rate reaching 9.7%—a worrying indicator for future economic stability.
On the issue of debt, Arab nations continue to seek external loans to service financial obligations. In 2024, government debt as a percentage of GDP declined to 48.3%, with projections suggesting a further decrease to 47.6% by the end of 2025. Conversely, external debt rose to approximately 56% of Arab GDP in 2024, with expectations of a slight decline to 54.5% in 2025.
Meanwhile, Arab countries are working toward reducing inflation rates, leveraging budget surpluses, enhancing foreign trade value, and expanding foreign currency reserves. These efforts aim to strengthen economic resilience and ensure the region can sustain imports of goods and services for extended periods in the coming years.
The writer is a Muscat-based economic analyst who previously worked for CBO and OCCI