Bahrain, Oman & Qatar Outlook

Economic growth in Bahrain, Oman, and Qatar is forecast to proceed at a moderate pace in 2025 and 2026, buoyed especially by higher output volumes in the hydrocarbon sector. Bahrain’s fiscal deficits are seen widening amid lower oil prices and still-elevated interest rates, despite repeated consolidation efforts. Following sustained reform implementation, Oman’s positive economic performance is seen continuing with non-oil expansion, fiscal surpluses and a declining debt-to-GDP ratio. In Qatar, the cyclical downturn following the 2022 World Cup boom has faded and growth is seen accelerating again on stronger tourism activity, new government initiatives, and increased LNG production.  

Bahrain: Fiscal deficit to widen, renewed GCC support key

Economic growth in Bahrain is expected to come in at only 0.8% for 2024 mainly on the back of strong growth in non-oil activities which were up by 3.6%, thus overcoming the contraction in oil GDP of 2.7%. In 2025 and 2026, growth is seen improving to 2.8% on average that will be mainly driven by a pickup in oil GDP of 1.2% in 2025 and 7.6% in 2026 with total oil production averaging 185kb/d in 2026, while the non-oil economy will be boosted following the inauguration of the BAPCO refinery program. However, low oil prices will wipe out revenue gains from higher oil volumes, causing a slowdown in investment and keeping the credit rating under pressure.

Bahrain’s fiscal accounts are vulnerable to the slump in oil prices as hydrocarbon receipts represent 61% of all revenues, requiring a high breakeven fiscal oil price of around $130 per barrel in 2025. In 2024, the fiscal deficit is estimated at 7% of GDP versus 4.7% in the previous year mainly on the back of lower oil production (down 6% y/y). The situation gets more pressing as we expect oil prices to average $70 in the coming 2 years, widening the primary deficit to 4% of GDP versus 1.2% in 2024 and worsening the overall deficit to 9.3% of GDP. On that front, debt to GDP could widen to 141% of GDP (from an estimated 133% of GDP in 2024) at an oil price of $70/bbl.
Renewed GCC support to Bahrain will play a role in filling the country’s financing gap, especially with foreign reserves standing at around $4.8bn (low relative to maturing debt of $2bn per year). Such support could prevent a possible credit downgrade, especially after Fitch and S&P revised the outlook to negative from stable recently. 

Oman: Economic reforms are paying off, evident in solid growth

In Oman, non-oil GDP is projected to grow solidly at 3%+ rates in both 2025 and 2026 mainly on the back of continuous execution of private sector investments led by construction, manufacturing, wholesale & retail trade, and tourism. Hydrocarbon sector growth is expected to recover by 2.5% and 3.7% in 2025 and 2026, respectively, after it fell in 2024 by around 1.4% on lower oil production from participating in OPEC+’s latest voluntary output cut. On that front, Oman is expected to see growth of 3.1% and 3.6% for 2025 and 2026 coming higher than Oman’s 10-yr avg of 2.6%.

Lower oil prices will have a limited impact on Oman’s economy relative to the MENA region, given the government’s low fiscal breakeven of around $62-65/bbl. This will allow the fiscal position to remain in positive territory at around 1.3% of GDP, assisted by higher hydrocarbon output in 2026. Should oil prices slide to $60/bbl or below, the fiscal balance would slip into a deficit – but still a minimal one of less than 1% of GDP. The sovereign credit rating has been revised back into investment-grade territory in a further sign of improved economic resilience. 

Omani authorities have managed to put the country on a steady path as they had promised earlier. That includes the state-owned enterprises deleveraging their balance sheets which has allowed GRE debt to drop by about 10% of GDP over the past 3 years. The government is in the process of finalizing its 11th 5-year plan covering 2026-2030 with a heavy focus on economic diversification and further increasing the non-oil sector’s contribution to GDP. Key sectors that will be of major focus are manufacturing, tourism, and logistics. 

Qatar: LNG expansion to unlock next growth wave 

Economic growth in Qatar is expected broadly steady in 2025 at 2.4% before accelerating sharply to 5.5% in 2026. Hydrocarbon GDP will play an increasingly vital role in shaping Qatar’s medium-term growth outlook (+9.8% in 2026), with the giant offshore North Field gas expansion project nearing completion. LNG output expansion is set to generate a 63% jump in already massive capacity by 2027-2028 (to 127 mtpa) and will eventually have positive knock-on effects on non-hydrocarbon GDP, as higher resulting revenues are channeled back into the economy to meet the next wave of development goals. Qatar’s Third National Development Strategy targets an annual average growth of 4% in 2024-2030, also helped by business efficiency, FDI-promoting and innovation-enhancing reforms. Goals include growing labor productivity by 2% per year, attracting $100bn in cumulative FDI and developing specialized economic ‘growth’ clusters in manufacturing, logistics and tourism. 

The fiscal accounts should continue to show a surplus over the forecast horizon, from 2.3% of GDP in 2025 to a wider 4.5% of GDP next year as the first LNG trains from the gas expansion project come online. In recent years, budget surpluses were deployed to lower outstanding public debt, a trend that will likely continue in the medium term; public debt could fall to 34% of GDP by 2026. Downside risks to the outlook include a more severe than expected global economic downturn that weakens energy prices, and potentially lower prices for LNG in the event of global market excess supply. That said, the scale of Qatar’s imminent energy output expansion and domestic investment targets should provide some degree of resilience against international headwinds.

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