UAE Economy Set To Grow 5% In 2026, Says World Bank

The report notes that the global economy is proving more resilient than previously anticipated, despite ongoing trade tensions and policy uncertainty.

Global growth is projected to ease to 2.6 per cent in 2026 before edging up to 2.7 per cent in 2027, marking an upward revision from the World Bank’s June forecast.

World Bank UAE economy forecast

The improved outlook reflects stronger-than-expected growth, particularly in the United States, which accounts for around two-thirds of the upward revision to the 2026 global forecast.

Even so, the World Bank cautioned that if current projections hold, the 2020s are on track to be the weakest decade for global growth since the 1960s.

The report highlights that the sluggish pace of expansion is widening global living standards gaps. By the end of 2025, per capita income in nearly all advanced economies exceeded 2019 levels, while around one in four developing economies remained below those levels.

At a regional level, growth in Gulf Cooperation Council (GCC) countries is projected to rise to 4.4 per cent in 2026 and 4.6 per cent in 2027. Growth across the Middle East and North Africa, Afghanistan and Pakistan (MENAP) region is expected to reach 3.6 per cent in 2026, improving further to 3.9 per cent in 2027.

In 2025, global growth was supported by a surge in trade ahead of policy changes and rapid adjustments in global supply chains. These temporary boosts are expected to fade in 2026 as trade and domestic demand soften, although easing global financial conditions should help cushion the slowdown.

Global growth

Global inflation is projected to decline to 2.6 per cent in 2026, reflecting softer labour markets and lower energy prices, with growth expected to pick up again in 2027 as trade flows adjust and policy uncertainty diminishes.

Indermit Gill, Chief Economist of the World Bank Group and Senior Vice President for Development Economics, said: ““With each passing year, the global economy has become less capable of generating growth and seemingly more resilient to policy uncertainty.

The report expects growth in developing economies to slow to 4 per cent in 2026, down from 4.2 per cent in 2025, before edging up to 4.1 per cent in 2027 as trade tensions ease, commodity prices stabilise, financial conditions improve and investment flows strengthen.

Growth in low-income countries is projected to be higher, averaging 5.6 per cent over 2026–2027, supported by firming domestic demand, recovering exports and moderating inflation. However, this pace is not expected to narrow income gaps with advanced economies.

Per capita income growth in developing economies is forecast at 3 per cent in 2026, around one percentage point below its 2000–2019 average, with incomes projected to reach only 12 per cent of levels in advanced economies.

Policy challenges

The World Bank warned that these trends could intensify job-creation pressures in developing economies, where 1.2bn young people are expected to reach working age over the next decade.

Addressing this challenge will require a comprehensive policy effort centred on three pillars: strengthening physical, digital and human capital to raise productivity and employability; improving the business environment through greater policy credibility and regulatory certainty; and mobilising private capital at scale to support investment.

The report also highlights the need for developing economies to restore fiscal sustainability, which has been weakened by overlapping shocks, rising development needs and higher debt-servicing costs. A special-focus chapter examines the use of fiscal rules to manage public finances.

M. Ayhan Kose, Deputy Chief Economist and Director of the World Bank’s Prospects Group, said: “With public debt in emerging and developing economies at its highest level in more than half a century, restoring fiscal credibility has become an urgent priority”.

He added that while well-designed fiscal rules can help stabilise debt and rebuild policy buffers, their success ultimately depends on credibility, enforcement and political commitment.