The World Bank expects economic growth in the West Bank and Gaza to slow to 1.5 per cent in 2026, while Gaza’s economy remains in “near-total collapse” amid continued restrictions and stalled reconstruction.
The forecast marks a downward revision of 3 percentage points from April. Poverty in the area remains an estimated 41.9 per cent, according to the World Bank’s latest Economic Update for the Middle East, North Africa, Afghanistan and Pakistan. The report said flare-ups in tensions, reduced humanitarian aid and the failure to advance reconstruction are preventing recovery despite the October 2025 ceasefire.
“There were ongoing fragilities and now we see less humanitarian aid. We see a need to keep the attention,” said Roberta Gatti, Menaap chief economist at the World Bank. She said reduced aid compounds the economic costs of fragility, and that continued attention and investment matter if the consequences are to be kept from reaching future generations.
Gaza’s stalled recovery
The West Bank and Gaza forecast forms part of a wider regional downturn linked to the Iran war and constrained energy supplies. The World Bank projects that the region’s gross domestic product will contract by 2.1 per cent in 2026. Economists had already cut the forecast from 3.6 per cent in January to 2.1 per cent in April.
The report said the closure of the Strait of Hormuz initially cut off much of the region’s energy supplies, hitting tourism, aviation and logistics while increasing uncertainty in financial markets. “This conflict is very painful and it has concentrated the losses of the conflict in our region while the global economy and other regions are upgrading their forecasts, and we are downgrading significantly,” Gatti said.
Gulf Co-operation Council economies are projected to contract by an average of 4.3 per cent in 2026, a 5.7 percentage-point reduction from the April forecast. Lower export volumes linked to the Strait’s closure have cut output and government revenue, the World Bank said.
Oil exports and conflict
Gulf oil production fell from a prewar average of 26 million barrels a day to about 16 million in March. The IMF’s PortWatch monitor recorded just three tankers passing through the Strait in the seven-day moving average ending September 27. “It’s a volume story. It’s a quantity story for us. It’s a price story for the world,” Gatti said.
The UAE and Saudi Arabia are forecast to shift from growth of 4.6 per cent and 6.2 per cent, respectively, in 2025 to contractions of 1.6 per cent and 2.0 per cent in 2026. Qatar’s economy is forecast to contract by 20.9 per cent, while Kuwait’s is projected to contract by 14.6 per cent. Oman alone among GCC members is expected to grow, at 3.1 per cent.
Renewed hostilities between Israel and Hezbollah are reversing Lebanon’s economic recovery, the report said. Lebanon’s economy grew by 4.2 per cent in 2025, but the World Bank projects it will contract by 6.4 per cent this year. The bank also cut its growth forecasts for Afghanistan and Yemen to 3 per cent and 1 per cent, respectively.
Forecasts depend on reopening
The World Bank’s projections for 2027 assume the Strait of Hormuz will gradually reopen beginning December 31. Under that scenario, economic activity would rebound by 8 per cent in the UAE, 6.1 per cent in Saudi Arabia, 25 per cent in Qatar and 20.5 per cent in Kuwait. The GCC as a whole is projected to grow by 8.6 per cent.
Oil-importing countries are expected to fare better. The World Bank forecasts 5.1 per cent growth in Egypt, 4.4 per cent in Morocco and 3.7 per cent in Pakistan in 2026. Jordan’s projection remains at 2.7 per cent, while the bank lowered Tunisia’s forecast to 2.3 per cent.
The report also identified artificial intelligence as a potential source of productivity gains, saying it could boost productivity in up to 20 per cent of regional jobs. Gatti said AI needs regulation and political will to work well.