Economics & Development

After an estimated 0.9 percent contraction in 2025, Botswana’s GDP is projected to grow by 2.7 percent in 2026, reflecting a moderate rebound in diamond production. Sustaining growth will require gains in private sector-led diversification and fiscal consolidation. Downside risks stem from delays to domestic reforms and external shocks. Poverty levels, projected at 19.7 percent in 2026 (US$3 line, 2021 PPP), have stagnated over the past decade.

GDP growth accelerated to 8.1 percent in 2025, driven by services and industry, and is projected to moderate to 7.1 percent in 2026–28. Inflation eased to 1.1 percent but will rise due to rising global fuel prices. Poverty continues to decline but remains high at 40.1 percent. Fiscal consolidation reduced the deficit to 2.9 percent of GDP and public debt declined to 56.8 percent. Key downside risks include the Middle East conflict, insecurity, climate shocks, and political risks.

FSM, RMI, and Palau enter FY26 with positive but uneven momentum. FSM grew 1.1 percent in FY25, constrained by weak private investment and delivery bottlenecks; near-term prospects hinge on resolving both. RMI expanded by 2.5 percent, and moderating to 2.0 percent in FY26 on fisheries and Compact spending. Palau's growth is expected to moderate from 6.7 percent to 3.0 percent as tourism normalizes. Poverty is declining, but energy costs pose a headwind.

Following robust GDP growth of 6.6 percent in 2025, growth is expected to moderate to around 4.4 percent in 2026 and 4.1 percent over 2027–2028, supported by solid domestic consumption and strong agricultural performance. This momentum has contributed to a continued decline in poverty, estimated at 17.9 percent in 2025. Reforms to strengthen human capital and infrastructure quality could further boost investment and potential growth.

Qatar’s economy has been significantly affected by the conflict in the Middle East, including attacks on liquefied natural gas (LNG) infrastructure and disruptions to the Strait of Hormuz, the primary route for its hydrocarbon exports. The halt in LNG production and constrained trade flows are expected to drive a sharp contraction in 2026. While strong external buffers provide some resilience, risks to the near-term outlook are firmly tilted to the downside.

The conflict in the Middle East presents a mixed outlook for Oman’s growth. Higher oil prices and improved fertilizer export revenues could support fiscal and external balances, at least in the short term, although logistical frictions and elevated regional uncertainty may negatively affect the tourism sector and broader economic sentiment.

Liberia’s economy grew by 5.1 percent in 2025, up from 4.0 percent in 2024, driven by a rebound in mining. Inflation remained in single digits, and fiscal consolidation strengthened public finances despite declining grants. Extreme poverty is projected to increase in 2025 before reversing thereafter. The quality of jobs remains weak and financing conditions tight, underscoring the need for diversification, domestic revenue mobilization, and private investment.

In 2025, growth accelerated to 7.4 percent, spurred by bauxite production. Revenues reached 17.9 percent of GDP, inflation fell to 3.2 percent, and the poverty rate decreased to 22.3 percent. GDP growth is projected at 8.8 percent in 2026, averaging 11.1 percent over 2027–28 as Simandou iron production ramps up. The fiscal deficit will narrow to 3.0 percent by 2028, amid risks from the conflict in the Middle East and weather shocks.

Gabon’s growth decelerated to an estimated 2.5 percent in 2025 amid maturing oilfields and challenges facing the wood and manganese sectors. Lower oil production and high spending needs pose significant fiscal challenges. To create more jobs and reduce poverty substantially, it will be key to prioritize energy, transport, and social sectors, while aligning public investments with fiscal space and creating better business conditions for firms.

The economy faces risks from its high exposure to the conflict in the Middle East, with adverse effects on tourism, energy exports, and investment sentiment. Bahrain's combination of small size and geographic proximity to the conflict’s epicenter makes it one of the most economically vulnerable states in the event of prolonged tensions. This adds to fiscal challenges, with fiscal deterioration and rapidly rising debt.

Moldova’s economy recovered in 2025 but the impacts of the conflict in the Middle East is expected to slow down growth in 2026. Fiscal and external deficits remain elevated, with inflation likely to rise again. Timely implementation of reforms and the investment plan have the potential to strengthen growth and generate jobs. Medium-term growth depends on resilience to geopolitical and energy shocks, and progress with European Union (EU) accession.

While growth remains robust, the Middle East conflict is introducing heightened economic risks for Saudi Arabia, potentially slowing progress towards its Vision 2030. Elevated uncertainty may weigh on recent growth momentum supported by oil and non-oil sectors. Before the conflict, inflation was contained and unemployment declined, though fiscal pressures intensified. Risks stem from oil supply disruptions, Strait of Hormuz exports, and threats to critical infrastructure.

Growth remained strong at 7.5 percent in 2025, supported by private consumption. Poverty continued to decline, supported by rising real wages and household incomes, though unemployment remains structurally high. Growth is expected to ease towards 5 percent in 2026 and over the medium term. Domestic political uncertainty and heightened geopolitical risks could further weaken the reform momentum.

Albania’s economy maintained positive momentum through September 2025, supported by private consumption, tourism, and construction. GDP grew by 3.7 percent in Q3 2025, year on year. Inflation remained below target, while poverty declined amid a tighter labor market and rapid wage growth, which boosted incomes but added to price pressures. Growth is expected to moderate to 3.6 percent in the medium term, reflecting a maturing tourism sector.