GCC Inflation Hit 1.8% In 2025 As Housing And Services Led Price Rises Across the Region

Inflation across the GCC remained below 2% for a second consecutive year in 2025, edging up to 1.8% from 1.6% in 2024, keeping the GCC among the lowest inflation environments globally.GCC inflation lowest in the worldAt 1.8%, the GCC's 2025 inflation rate remained among the world's lowest-inflation regions, with inflation below most major economies, including Japan at 3.2%, the US at 2.6%, the EU at 2.5%, and the euro area at 2.1%, according to a report by the GCC-Stat released on Monday.Among GCC trading partners, Brazil recorded the highest inflation rate at 5%, followed by the UK at 3.9%, Japan at 3.2%, India at 2.8%, the US at 2.6%, Germany at 2.2%, South Korea at 2.1%, Italy at 1.5%, and France at 0.9%. China recorded no inflation.Housing and miscellaneous goods and services were the main drivers of the 2025 increase, accounting for about 73% of the overall rise in consumer prices. Miscellaneous goods and services recorded the highest inflation rate at 5.4%, followed by housing at 4%, recreation and culture at 2%, restaurants and hotels at 1.6%, food and beverages at 1.2%, and education at 1%. The GCC's inflation trajectory over the past five years reflects the region's relative insulation from the global price surges that followed the COVID pandemic. Inflation rose from 1.5% in 2020 to 2.4% in 2021, peaked at 3.2% in 2022 alongside the global commodity spike, then eased steadily to 2.3% in 2023, 1.6% in 2024, and 1.8% in 2025. A 2.1% decline in global food and beverage prices helped ease imported inflationary pressures in 2025, though the report flagged the 15.2% increase in natural gas prices and ongoing geopolitical tensions as risks requiring close monitoring.War impact on GCC inflationGCC headline inflation eased slightly in the early months of 2026 despite an uptick in grocery prices, as downward movement in housing prices offset food and beverage price spikes driven by the war's supply disruption. However, the IMF has revised global headline inflation up to 4.7% in 2026, driven primarily by war-related spikes in commodity prices, including crude oil, natural gas, fertilizers, and metals. In a more adverse scenario with oil prices at $110 a barrel, global inflation could reach 5.4% in 2026. For the GCC specifically, the inflationary impact of the war has been present but more moderate than in the wider MENA region. GCC countries face inflation trends from the energy supply shock, but the magnitude is less steep than in neighboring non-GCC economies, according to a May report by Kamco Invest. Additional inflation risks exist from food imports, with more than 80% of food consumption in four GCC members sourced internationally, according to the IMF, and from reliance on desalinated water. Prolonged disruptions could affect food inventories and push food prices higher.2027 rebound on horizonGCC GDP is forecast to expand 8.1% in 2027 as energy trade routes normalize, tourism demand returns, and business confidence improves. That rebound follows an expected 2.4% contraction in GCC GDP in 2026, with the baseline scenario assuming a ceasefire is reached by the end of July and Strait of Hormuz operations normalize by year-end.Saudi Arabia and the UAE have been better positioned to manage the disruption, with both countries able to reroute some exports through alternative pipelines. Non-oil activity in both countries has remained relatively resilient, with May PMI surveys showing output growth reaching its strongest level in three months. Across the GCC, non-energy sectors are expected to contract 1.1% in 2026 before returning to growth from 2027.Tourism has been among the hardest-hit sectors, with inbound arrivals expected to fall around 30% this year, translating into tens of millions fewer visitors and tens of billions of dollars in lost spending. Unlike energy, tourism recovery is expected to take longer because travel demand is closely tied to accessibility and visitor confidence.