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The war in the Levant is likely to end in the first half of 2025, with US President Elect Donald Trump’s desire to expand the Abraham Accords expected to be a factor in whether the Israel-Hamas conflict continues.
While conflict will still be present in the region in H1, analysis from BMI, a unit of Fitch Solutions, said the incoming US President is keen to end the war as a priority, and there is optimism that the recent ceasefire in Lebanon can be built on to end the war in Gaza.
During 2025, GCC real GDP growth will soar in the region, rising to 4.3% from 1.8% in 2024.
The UAE will lead growth in the GCC region at 5.2% and Saudi Arabia at 4.7%, with both economies continuing to focus on diversification plans and with deepening trade ties with Mainland China and India, in addition to increasing investment in sectors including aerospace, manufacturing and technology, said Roman Moubarak, the head of MENA country risk and global banking.
The UAE non-oil sector will grow by 6%, with stronger investment activity and higher private consumption, and the oil economy by 2.5%, with recovery expected after a contraction in 2024 as OPEC+ rolls back supply restrictions in the second half of 2025.
Overall, Abu Dhabi’s growth will be the fastest at 5.6%, with Dubai’s at 3.5%.
BMI is working on the assumption that the war is likely to end 2025, but there are three scenarios. The base case is a 75% chance that the war continues during the first six months, with contained regional instability and flare-ups between Israel and Iran.
The second, put at a likelihood of 20%, is that the war in the Levant stops earlier than expected.
The third, at 5% likelihood, is that there will be a widespread conflict involving Iran, Israel and potentially the US, including increased involvement from Houthis in Yemen and other Iran-backed groups in Syria and Iraq.
Saudi gigaprojects
Nick Finch, senior infrastructure analyst, said Saudi Arabia will be one of the strongest performing markets in 2025 due to the envisaged extent of gigaproject activity.
However, he said BMI analysis consistently finds that scale of the ambition of the Saudi Arabian gigaprojects is unlikely to be realised to its full extent.
Projects that have global visibility, such as those related to the Asian Games and the FIFA World Cup, to be held in the kingdom in 2034, as well as those which have precedent, are the ‘landing zone’, he said.
Saudi Arabia’s loser monetary policy and increased investment by sovereign wealth funds, and, the government’s increased efforts to meet some of the mid-term Vision Realisation Programme deadlines, which are set for 2025, will contribute to growth, Moubarak said.
Zawya reported that the Public Investment Fund intends to cut its overseas investment from around 30% to around 18%-20%.
“This reallocation of assets could free up 8% of GDP worth of capital towards domestic investment,” Moubarak said.
(Reporting by Imogen Lillywhite; editing by Seban Scaria)
