Arab economies entered 2026 carrying a heavy legacy of chronic problems; weak growth, high unemployment, widening social inequality, and limited capacity to absorb shocks.
اضافة اعلان
Several major variables coincided and imposed direct pressures on the region; declining oil prices, the continuation of high interest rates, the trade wars ignited by the U.S. administration at the beginning of last year, the expansion of wars and conflicts, rapid technological shifts, especially artificial intelligence, and the accelerating transition toward renewable energy in response to climate crises.
During last year, 2025, the effects of these variables varied clearly among Arab countries, because the region is not a single economic bloc. The landscape can be read through three main groups: oil-exporting countries, middle, and low-income countries, and countries living under occupation or experiencing armed conflicts at different levels. The impact was unequal impacts; some countries saw their indicators deteriorate quickly, others maintained a degree of financial balance, while other countries found themselves in a daily race for survival and to prevent collapse.
In oil-exporting countries, the most prominent factor was declining revenues due to the drop in oil prices during the past year to around $60 per barrel, with expectations that the price will fall further during 2026. This decline placed governments before two choices: either reduce spending and postpone major projects, or compensate for the shortfall by increasing borrowing. Some of these countries chose to finance part of their development commitments through debt, meaning that the continuity of projects has become tied to fluctuations in the oil market and to borrowing costs.
As for middle- and low-income Arab countries, they were exposed to compounded pressure. On one hand, the cost of external financing rose due to interest rates. On the other hand, internal pressures linked to weak growth and limited job opportunities continued. With continued borrowing, the public debt ratio in a number of these countries exceeded 100 percent of GDP, increasing the fragility of financial and monetary stability and reducing governments’ ability to expand social and investment spending.
At the same time, unemployment remained high, and Arab countries are among the highest globally in unemployment rates, and the highest in youth unemployment. The result was clear, more poverty and social pressures, especially when this is coupled with weak growth rates that do not generate enough jobs and do not improve incomes.
On the other hand, countries living under Israeli occupation, by which I mean Palestine, and those experiencing armed conflicts such as Yemen, Sudan, Syria, and Libya, in addition to relatively fragile situations such as Lebanon, face a different kind of challenge. Here, the discussion is not about improving indicators or attracting investment, but about the minimum conditions for economic and social survival, where unemployment is extremely high, job opportunities are fragile, poverty is widespread, the economy is contracting, and institutional capacity to manage the economy and basic services is declining.
Looking at 2026, there are no serious indicators of a near breakthrough in the key variables. The trade wars ignited by the U.S. administration are still ongoing, and their results are expected to appear this year, creating a tense global economic environment, especially among the major economic centers. Moreover, the war of genocide and Israeli expansion is no longer confined to Palestine, and its repercussions extend across the region. In the background, military and political tensions are expanding globally, such as the continuation of the Russia–Ukraine war and the escalation of conflict over Taiwan, Latin America, and the multi-dimensional U.S.–China conflicts, which puts pressure on global trade, supply chains, and investment flows.
The year 2026 is likely to be another year of uncertainty for the global economy, and for Arab economies as well. Economic and social indicators will remain under pressure; weak economic growth, higher debt, more unemployment and poverty, and persistent inflation, though at varying levels from one country to another.
