The Arab region’s economy posted a modest expansion in 2024, with gross domestic product rising to $3.6 trillion on the back of selective gains in key economies. Growth, though uneven across the region, was concentrated in a handful of powerhouses, signaling a shift toward more resilient engines of expansion. Looking ahead, global and regional indicators point toward a cautiously brighter horizon for 2025, driven largely by oil-related activity, substantial investments, and ongoing diversification efforts. In this context, Moody’s recent outlook aligns with a narrative of incremental improvement, underscoring the role of large-scale investments, evolving energy dynamics, and structural reforms as catalysts for regional GDP momentum. The following analysis deconstructs the 2024 performance, the drivers behind the 2025 outlook, and the strategic implications for the broader Arab economy, while reflecting on the balance of risks and opportunities that shape the medium-term trajectory.
Regional GDP performance in 2024 and the near-term outlook
In 2024, the Arab region recorded a 1.8 percent increase in real GDP, lifting the aggregate value to approximately $3.6 trillion. This milestone occurred despite a backdrop of regional challenges, underscoring a degree of resilience within the Arab economic bloc. The gains were not evenly distributed, however, as a limited set of economies emerged as primary accelerants of growth. Data from the Arab Investment and Export Credit Guarantee Corporation, known as Dhaman, pinpointed the core contributors to be Saudi Arabia, the United Arab Emirates, Egypt, Iraq, and Algeria. These five economies jointly accounted for more than 72 percent of the region’s total GDP, illustrating a pronounced concentration of output within a relatively small group of large, diversified markets. The concentration reflects a broader pattern of economic leadership within the Arab world, where high-value sectors, substantial investment activity, and policy reforms in Gulf Cooperation Council (GCC) countries are translating into outsized GDP contributions.
This growth pattern suggests a bifurcated regional landscape: a handful of oil-rich and commercially dynamic economies driving the bulk of output, while other economies experience more modest trajectories. The 2024 data imply that the region’s growth resilience hinges heavily on energy-related earnings, fiscal policy calibrations, and the ability to sustain investment flows even amid regional volatility. The implication for policymakers is clear: sustaining momentum will require maintaining investment confidence, advancing structural reforms, and leveraging the capital deepening that accompanies large-scale public and private sector projects. At the same time, the year’s performance confirms that diversification efforts, particularly in the Gulf states and in Egypt, remain central to broadening the base of growth and reducing reliance on commodity cycles.
From a policy and investment perspective, the 2024 outcome reinforces the importance of targeted support for high-impact sectors such as energy, infrastructure, manufacturing, and services that can absorb labor and capital inputs efficiently. The fact that 72 percent of regional GDP emanates from a small cluster of economies points to the potential for coordinated regional strategies that align investment incentives, regional value chains, and cross-border energy projects. The data also highlight the need for resilience in the remaining economies, including those that may be more sensitive to oil price fluctuations or global demand shifts. As markets look toward 2025, the performance signals a trajectory in which the region’s growth engine is increasingly powered by large-scale investments, strategic sectoral expansions, and continued reforms that improve productivity and ease of doing business.
Looking ahead, the mood around 2025 is tempered by cautious optimism. The region’s growth is expected to gain a modest uplift, driven by stronger performance in hydrocarbon-exporting economies and a continued push for diversification in wealthy economies. Analysts suggest that the expansion is likely to be supported by a combination of higher energy revenues, sustained investment activity, and efficiencies gained from ongoing reforms. The improvement is unlikely to be uniform across all Arab economies, but the momentum in the five leading economies signals a positive spillover effect for the broader region. In this context, the 2024 outcomes serve as a baseline that informs expectations for the coming year’s growth dynamics and policy choices, especially in the areas of fiscal management, investment promotion, and energy sector strategy.
The broader regional narrative also contends with geopolitical and macroeconomic uncertainties. While the data point to a favorable trajectory, potential shocks—from price volatility in energy markets to shifts in global demand—could moderate the pace of growth. The balance of risks underscores the importance of economic diversification and buffers that can cushion downturns. The positive takeaway is that a durable expansion appears feasible if policymakers maintain a steady course on investment, address structural bottlenecks, and foster environments conducive to innovation and private sector development. The 2024 performance establishes a credible platform from which to pursue the ambitious growth objectives embedded in several Arab economies’ reform agendas, while highlighting the central role of a handful of economies in sustaining overall regional prosperity.
Moody’s outlook: drivers, projections, and policy implications
Moody’s January forecast presents a nuanced, optimistic interpretation of the region’s growth prospects through 2025. The agency attributes a significant portion of the expected regional uplift to oil production and major investment projects, which together are projected to produce a 0.8 percentage point increase in annual growth across the Middle East and North Africa (MENA) in 2025. This suggests that the region’s near-term expansion will be disproportionately influenced by energy sector dynamics and the scale of investment activity across key economies, with hydrocarbon exporters playing a central role in lifting the regional growth rate. The Moody’s projection for 2025 envisions a region-wide growth rate of 2.9 percent, up from 2.1 percent in 2024, accompanied by a stable outlook on sovereign credit fundamentals over the next 12 months. The outlook reflects continued confidence in the capacity of Arab governments to manage public finances, support investment climates, and implement reforms that bolster resilience.
In addition to the headline regional forecast, Moody’s also offers a more granular view of the 2025 outlook for 14 Arab economies, predicting an average growth rate of 1.4 percent for the year. This more moderate figure underscores a bifurcated growth pattern: while oil-producing and investment-heavy economies may drive stronger gains, there remains a broad base of economies where growth remains limited by non-oil factors and external headwinds. The agency emphasizes cautious optimism about the region’s performance in 2025, noting that the upturn is likely to be driven by expansion in 14 Arab countries, including a cluster of nine oil-producing economies that together contribute more than 78 percent of Arab GDP. This concentration of economic power around energy producers reinforces the centrality of petroleum revenue and associated investments in shaping the region’s macroeconomic trajectory.
Moody’s also highlights a potential reduction in regional unrest and conflicts as a supporting factor for improved revenues from oil, gas, and exports of goods and services. This positive sentiment around regional stability could ease risk premiums, improve investment sentiment, and bolster cross-border trade and infrastructure projects. It is important to recognize that such geopolitical improvements are contingent on a wide array of domestic and regional developments, including governance reforms, security dynamics, and the effectiveness of regional cooperation frameworks. Nevertheless, Moody’s notes that the transformative impact of large, strategic investments in 2025 is most evident in Saudi Arabia, where government and sovereign wealth fund spending linked to the Vision 2030 diversification program is expected to be a major growth engine. The combination of public-sector scale and private-sector participation could unlock downstream benefits for related sectors, including construction, manufacturing, and services.
A core element of Moody’s regional uplift is the anticipated acceleration in hydrocarbon exporters, driven by an unwinding of certain oil production cuts under the OPEC+ framework. The agency projects that real GDP growth for hydrocarbon-exporting nations will rise to about 3.5 percent in 2025, up from an estimated 1.9 percent in 2024. This projected acceleration reflects the easing of some production restrictions and the return of higher revenue dynamics to economies that have long depended on oil to finance development and diversification efforts. The projected improvement is set against a backdrop of continued energy demand in global markets, the ongoing importance of energy exports to government budgets, and the strategic emphasis these economies place on stabilizing and expanding their investment programs.
Specific country trajectories highlighted by Moody’s include major Gulf states and other energy exporters such as Saudi Arabia, the United Arab Emirates, Iraq, Kuwait, and Oman. These nations are expected to be the primary conduits through which the unwinding of production cuts translates into higher output and investment activity. The positive growth impulse from oil-related activities will likely permeate broader sectors, including construction, manufacturing, financial services, and logistics, creating a spillover effect that supports economic activity beyond traditional energy industries. Conversely, non-hydrocarbon economies may experience more mixed outcomes, underscoring the importance of policy diversification, structural reforms, and continued improvements in the business climate to attract investment and foster sustainable growth.
In sum, Moody’s outlook for 2025 hinges on a combination of energy-market dynamics and the scale of public and private investment programs across the region. The agency’s emphasis on Saudi Arabia’s Vision 2030-driven investments suggests that the Gulf’s reform agendas will be pivotal in shaping cross-border economic linkages, employment patterns, and productivity improvements. The projection of 3.5 percent growth for hydrocarbon-exporting nations signals a robust upside for those economies, even as the wider region pursues diversification and resilience-building measures. Taken together, the Moody’s forecast reinforces the view that 2025 could represent a meaningful inflection point for the Arab economy, with energy-rich economies spearheading gains and a broader group of countries gradually benefiting from investment-led expansion and policy reforms.
The energy arc: oil production, OPEC+ dynamics, and regional growth
A central thread in Moody’s 2025 outlook is the evolving landscape of oil production, influenced by the OPEC+ agreement and the broader strategy of oil-producing nations. The partial unwinding of strategic oil production cuts under OPEC+ is identified as a key driver behind the expected acceleration in growth for hydrocarbon-exporting economies in 2025. As production constraints loosen, output volumes are anticipated to rise, translating into higher export revenues, greater fiscal space, and expanded investment capacity for governments and state-linked institutions. This shift in the oil production regime is not only a matter of volumes but also a signal about the trajectory of energy policy, market discipline, and long-range planning for energy sector modernization, including refining capacity, petrochemical development, and associated supply chains.
The impact on the region’s GDP is expected to ripple beyond the energy sector itself. Higher oil and gas revenues bolster public budgets, enabling increased capital expenditure on infrastructure, housing, transportation networks, and social services. This, in turn, stimulates demand across supplier industries and creates employment opportunities in construction, engineering, and related services. The broader macroeconomic environment benefits from higher government spending funded by energy proceeds, potentially reducing budgetary deficits and enabling monetary authorities to calibrate macroprudential measures to sustain growth. For economies strongly linked to oil, the Phillips curve dynamics could shift as inflationary pressures are influenced by energy costs and subsidization policies, requiring careful calibration of subsidies, price controls, and fiscal support to households and businesses.
The net effect for the Arab region, especially the hydrocarbon exporters, is a more favorable growth environment in 2025. The 3.5 percent real GDP growth forecast for these nations reflects the anticipated boost from higher production and eased price pressures, alongside a supportive investment climate aimed at diversifying away from crude dependence over the longer term. However, this reliance on energy markets also introduces vulnerabilities: sudden shifts in global energy demand, geopolitical tensions that could disrupt supply routes, or rapid policy shifts in major consuming countries may quickly alter the trajectory. Consequently, policymakers are urged to maintain flexible fiscal frameworks, diversify revenue streams, and strengthen non-oil sectors to ensure resilience against oil-price volatility and external shocks. The energy arc thus emerges as a defining feature of the 2025 outlook, with its implications extending across trade, finance, and development planning across the Arab world.
Country dynamics and sectoral implications within the 14 Arab economies
The Moody’s analysis highlights that 14 Arab economies are projected to experience growth in 2025, with nine oil-producing economies among them accounting for a substantial share of the region’s output—more than 78 percent of Arab GDP. This concentration underscores the outsized influence of energy producers on regional macroeconomic conditions and policy priorities. Within this framework, the Saudi economy stands out as a focal point for investment and reform activity linked to Vision 2030, a long-range diversification program geared toward broadening the economic base beyond oil and expanding higher-value sectors. The scale of government and sovereign wealth fund spending associated with this plan is expected to be a major driver of growth in 2025, potentially generating spillovers into related industries such as construction, manufacturing, services, and financial markets. The implications for neighboring economies include potential positive externalities from regional trade integration, shared supply chains, and enhanced regional capabilities in project financing, risk management, and technology transfer.
Beyond Saudi Arabia, the United Arab Emirates and Iraq play critical roles in shaping the regional growth narrative. The UAE’s diversified economy, backed by substantial investment activity, is positioned to benefit from continued project execution in infrastructure, technology, and industry clusters. In Iraq, investment and development initiatives, while exposed to security and governance considerations, hold the promise of unlocking a broader range of opportunities in energy, services, and manufacturing as stabilization progresses and financing becomes more readily available. Algeria and Egypt, as large-scale economies with distinct structural features, contribute to the regional mix by combining energy resources with formidable demographics and sectoral diversification efforts. The distribution of growth across these economies reinforces the need for coordinated regional policies that facilitate cross-border investment, create stable macroeconomic environments, and promote private-sector dynamism.
The implications of this country profile for broader regional strategy are multifaceted. For one, sustaining aggregate growth will require managing energy-market risk while simultaneously advancing reform agendas that enable private investment to scale. The emphasis on oil producers also invites ongoing attention to the governance of resource revenues, fiscal sustainability, and public investment efficiency. The leadership in these economies may focus on strengthening institutions, improving the business climate, and expanding human capital to ensure that growth translates into inclusive development outcomes. At the same time, non-oil economies remain important for regional resilience, as they diversify growth engines, strengthen export competitiveness, and develop human capital to participate in higher-productivity activities. The overall trajectory suggests a regional growth architecture that is heavily energy-dependent in the near term but with strategic diversification objectives that could gradually reduce vulnerability to oil-cycle fluctuations over the longer horizon. This dynamic highlights the importance of cross-border collaboration, shared best practices, and coordinated investment strategies to maximize the spillover benefits of energy-led growth while accelerating the transition toward more diversified economies.
Investment, revenues, and the outlook for 2025: optimism tempered by risks
A central theme in the 2025 outlook is the expectation of elevated investment activity and higher energy-related revenues, which together are expected to lift gross domestic product across the region. In the wake of large-scale investments anticipated in 2025, there is a sense of cautious optimism that the region can translate capital commitments into tangible outcomes—such as improved infrastructure, enhanced industrial capacity, and expanded service sectors—that contribute to higher productivity and job creation. The projected revenue growth from oil, gas, and other exports reinforces the plausibility of stronger public finance dynamics, enabling governments to deploy resources in alignment with strategic development priorities, while maintaining prudent fiscal management to uphold creditworthiness.
Nonetheless, the outlook features notable uncertainties and risks that policymakers must monitor closely. The performance of hydrocarbon exporters is particularly sensitive to fluctuations in global energy demand and prices, which can be volatile and subject to geopolitical developments beyond the region’s control. In addition, regional stability remains a critical determinant of investment confidence. Any resurgence of unrest or conflict could dampen investment sentiment, disrupt supply chains, and complicate the execution of large-scale capital programs. The non-oil economies may face a more challenging environment, given their exposure to external demand, commodity price cycles, and domestic structural constraints. To mitigate these risks, policy measures such as prudent fiscal planning, targeted subsidies, social protection programs, and currency stability will be essential components of a resilient macroeconomic strategy.
From a practical standpoint, the 2025 outlook implies that governments should prioritize creating a favorable investment climate, including streamlined regulatory processes, transparent governance, and robust financial sector development. The role of sovereign wealth funds and public investment authorities will likely be pronounced in channeling capital toward sectors with high multiplier effects and long-term growth potential. Cross-border collaboration, regional project pipelines, and the harmonization of standards and incentives can help maximize the scale and impact of investments. The 2025 strategy, therefore, rests on a balance between leveraging energy revenues to finance diversification and building a more diversified, innovation-driven economy that can sustain momentum beyond the energy cycle. This approach aligns with Moody’s projection of a 2.9 percent regional growth rate in 2025, underpinned by a selective, investment-led dynamic across energy exporters and a broad-based, albeit slower, expansion in other economies.
Sectoral implications and the path to deeper diversification
The interplay between energy revenues, investment cycles, and structural reforms shapes sectoral outcomes across the Arab economies. In 2025, sectors tied to energy production, such as upstream exploration, refining, petrochemicals, and logistics linked to oil, are expected to see elevated activity, given the anticipated unwind of production cuts and the corresponding improvement in price and revenue conditions. This environment will likely foster job creation, supplier networks, and capital formation in the short term, with potential positive feedback loops into construction, housing, and urban development projects that accompany large-scale energy investments. The spillover effects extend into financial services and professional industries as firms mobilize capital, manage risk, and finance ongoing projects. The architecture of growth thus emphasizes energy-linked industries while simultaneously supporting broader value chains that can contribute to the diversification objective.
In parallel, the non-oil economies in the region are expected to benefit from improved trade dynamics, higher public spending in infrastructure, and increased private investment in manufacturing, services, and technology-enabled sectors. The 2025 growth path for these economies will depend on progress in governance, ease of doing business, and the effectiveness of reforms designed to attract foreign direct investment. Education, healthcare, and digital infrastructure emerge as critical enablers of productivity and competitiveness, helping these economies to participate more effectively in regional and global value chains. The region’s development narrative thus converges on the dual goals of safeguarding energy-driven growth while expanding capabilities in non-energy sectors to reduce vulnerability to oil market cycles over time.
From a practical policy perspective, the sectoral implications call for targeted interventions across multiple dimensions. Governments may focus on building the infrastructure that links energy-rich regions with manufacturing hubs, improving supply-chain resilience, and accelerating the adoption of advanced technologies across industries. Public-private partnerships can be a powerful instrument to mobilize capital, share risk, and accelerate project delivery. Education and workforce development should align with sectors prioritized for growth, ensuring that the labor force possesses the skills required by modern industries. In addition, macroeconomic stability—through sound fiscal management, monetary policy coordination, and exchange-rate discipline—will underpin confidence among investors and support sustained expansion in both energy and non-energy sectors. The end result is a more resilient, diversified Arab economy that is better equipped to navigate future energy cycles and global economic shifts.
Conclusion
The Arab region’s economy demonstrated resilience in 2024, with GDP rising to $3.6 trillion and growth driven by a focused set of economies that together accounted for the majority of regional output. Moody’s 2025 outlook reinforces a view of cautious but meaningful improvement, anchored by oil production and substantial investment activity that are expected to lift regional growth by roughly 0.8 percentage points. The forecast of 2.9 percent regional growth in 2025, up from 2.1 percent in 2024, reflects a balanced expectation of energy-led expansion alongside broader diversification efforts, with 14 Arab economies collectively anticipated to grow around 1.4 percent, and nine oil-producing economies contributing a dominant share of Arab GDP.
The energy landscape remains central to this outlook, with the partial unwinding of OPEC+ production cuts anticipated to bolster growth among hydrocarbon exporters to around 3.5 percent in 2025. This momentum is expected to translate into higher government revenue, increased public investment, and enhanced capacity to fund diversification initiatives. Yet the region’s path to sustained, broad-based growth will require continuous attention to governance, investment climate, and the management of external risks. Regional stability, commodity price trajectories, and the ability to translate energy windfalls into job creation and productivity gains will shape outcomes across both oil-dependent and non-oil economies.
Ultimately, the 2025 trajectory hinges on the successful execution of large-scale investments—especially in Saudi Arabia’s Vision 2030 agenda—and a continued push toward diversified, innovation-driven growth across the Arab economies. Policymakers will need to balance capital-intensive projects with measures that improve business climate, nurture human capital, and strengthen resilience against volatility in energy markets. If these conditions are met, the region can translate energy revenues into durable development, reduce reliance on commodity cycles, and broaden the base of growth to improve living standards and economic security for more of its populations.
