Digital Transformation and SMEs Key to MENA’s 2026 Economic Expansion

The Mastercard Economics Institute  has released its annual report, ‘Economic Outlook 2026’, highlighting the key themes expected to shape the global economy next year. The report notes that policy changes which dominated headlines in 2025 are likely to influence economic trends worldwide throughout 2026. While increasing global fragmentation may pose challenges, rising adoption of artificial intelligence (AI) presents significant opportunities for growth.

In 2026, global GDP growth is expected to moderate to 3.1%, while the MENA region is projected to grow by 3.6% year-on-year, although rates will vary across countries. Qatar is forecasted to lead the region with 4.9% growth, supported by higher liquified natural gas (LNG) production, followed by Egypt at 4.4%. The UAE and Saudi Arabia are expected to see GDP growth of 4.3% and 3.6%, respectively, with non-oil GDP projected near 5% in both nations. Pakistan is expected to grow 3.6%. Other GCC markets are anticipated to grow at the following rates: Oman (3.3%), Bahrain (3.1%), and Kuwait (2.5%). The report highlights that public sector investment and resilient consumption will underpin economic activity across the region.

Inflation is projected to remain stable at around 2% in GCC countries and average 6.7% in oil-importing economies. Disinflation, supported by a weaker US dollar and lower energy prices, may allow central banks to reduce interest rates, helping ease cost-of-living pressures.

“Looking ahead to 2026, the economic forecast for the MENA region appears broadly favorable, driven in part by ongoing structural reforms. For oil-exporting countries, easing financial conditions will likely stimulate non-oil sectors, as interest rates decrease alongside rate cuts in the US. Reduced borrowing costs and controlled inflation are expected to benefit consumers, spurring demand across key sectors such as real estate, tourism, and retail. There are risks to the outlook however, including geopolitical tensions and climate-related challenges, which may disrupt investment and economic activity.”

– Khatija Haque, Chief Economist, EEMEA, Mastercard Economics Institute

Investment Remains a Key Growth Driver

GCC countries are investing heavily in renewables, construction, and technology, reshaping global supply chains and capital flows. In line with national visions such as Saudi Arabia’s Vision 2030, these investments are expected to support non-oil growth, create jobs, and attract talent. Oil-importing countries, meanwhile, are pursuing foreign direct investment (FDI), particularly in renewable energy. Egypt, for instance, has seen substantial investment in green hydrogen and solar power, leveraging its favorable geography and climate.

Diversifying Trade with Emerging Markets

Although higher tariffs and geopolitical tensions remain risks, trade in the MENA region has gradually shifted from advanced economies toward other countries in Eastern Europe, the Middle East, and Africa (EEMEA), as well as other emerging markets over the past two decades.

Digital Transformation and Fiscal Expansion as Tailwinds

The report anticipates that deeper AI integration and broader digital transformation will drive productivity and growth. Major investments in digital infrastructure across the Middle East, guided by initiatives such as Saudi Arabia Vision 2030 and the UAE National Strategy for Artificial Intelligence 2031, are expected to underpin this expansion.

SMEs Remain Vital to the Regional Economy

Small and medium-sized enterprises (SMEs) are increasingly adopting digital tools to streamline operations, reduce costs, and compete more effectively. In the UAE, SMEs account for just over 37% of retail spending, with e-commerce spending among SMEs growing year-on-year. The report notes that SMEs with strategic agility and digital readiness are best positioned to accelerate growth, expand into tech-driven services, and compete in sectors traditionally dominated by larger firms.

Consumer Trends

Consumers are expected to remain savvy, prioritizing international, tech-enabled, and value-conscious spending. They will continue to focus on meaningful experiences, such as travel and live events, while remaining price-sensitive for essential goods.

The ‘Economic Outlook 2026’ report draws on public and proprietary datasets, including anonymized Mastercard sales activity, and leverages models designed to estimate economic activity, providing a comprehensive view of the global and regional economic landscape for the year ahead.