The AI Growth Divide: Why Gulf Economies Could Surge While Poorer Neighbors Struggle to Catch Up

An IMF report finds that artificial intelligence could boost annual economic growth by up to 0.6 percentage points across parts of the Middle East and Central Asia, but unequal technological readiness threatens to widen economic disparities. Governments, investors and development partners must prioritize digital infrastructure, workforce skills, effective regulation and financial stability to turn AI investments into sustainable growth, competitive businesses and inclusive employment.

Artificial intelligence could transform economic growth across the Middle East and Central Asia, creating new opportunities for investment, productivity and employment. However, a 2026 report by the International Monetary Fund (IMF), prepared by its Middle East and Central Asia Department, warns that unequal technological readiness could widen economic disparities. The study estimates that AI could increase annual economic growth by up to 0.6 percentage points under favorable scenarios, but achieving these gains will require stronger digital infrastructure, skilled workers, effective regulations and sustainable investment strategies.

The findings have important implications for governments seeking economic diversification, international development institutions financing digital transformation and businesses exploring new markets. While wealthy Gulf economies are investing billions in advanced technologies, lower-income countries struggle to access computing infrastructure, attract investment, and prepare their workforces for technological change.

The $120 Billion AI Race That Could Redefine Gulf Economies

The Gulf Cooperation Council (GCC) is emerging as a major center of AI investment. Saudi Arabia, the United Arab Emirates, and Qatar announced about $120 billion in AI-related investment plans in 2025, exceeding 5% of their combined GDP. Around 44% of announced investment targets data centers, 40% other AI infrastructure and 13% specialized AI development zones.

These investments reflect efforts to reduce dependence on oil revenues and develop competitive technology industries. However, large infrastructure projects require reliable electricity, water, advanced equipment and specialized workers, raising questions about costs and long-term profitability.

The IMF finds that GCC economies are approximately 1.5 times better prepared for AI adoption than other emerging economies in the wider region and twice as prepared as low-income countries.

Geopolitical instability adds another challenge. The Middle East conflict beginning in February 2026 has increased uncertainty surrounding infrastructure development, international partnerships and investment confidence. Governments must therefore ensure that technological ambitions do not create excessive financial exposure.

From Digital Ambitions to Economic Growth: The Numbers Behind AI's Promise

The IMF's simulations suggest that AI could increase annual GDP growth by 0.2–0.5 percentage points in the UAE and 0.1–0.4 percentage points in Saudi Arabia. Other GCC economies could gain 0.1–0.35 percentage points, while the Caucasus and Central Asia could experience increases of 0.1–0.25 percentage points.

Emerging economies elsewhere in the region could gain approximately 0.08–0.23 percentage points, compared with 0.07–0.2 percentage points in low-income countries. These estimates represent possible scenarios rather than guaranteed outcomes.

Expanding AI-related exports could strengthen economic benefits further. The IMF estimates that export expansion could approximately double the additional growth gains associated with AI investment in other GCC economies, increase them by around 90% in Saudi Arabia and by roughly two-thirds in the UAE.

However, rapid investment could temporarily increase inflation and imports. Governments and central banks will need to balance technological expansion with price stability, fiscal discipline and external financing requirements.

The Jobs Divide: AI's Biggest Opportunity Could Become Its Greatest Risk

Employment disruption represents one of the report's most important concerns. Approximately 45% of jobs in GCC economies are highly exposed to AI, compared with 35% in the Caucasus and Central Asia, 23% in emerging regional economies outside the Gulf and 17% in low-income countries.

These figures do not mean that all exposed jobs will disappear. Instead, they indicate where AI could significantly change workplace responsibilities, productivity and demand for skills.

AI could improve efficiency in banking, healthcare, logistics, energy and public administration. However, routine administrative and clerical occupations face greater automation risks, potentially affecting younger workers and women employed in certain service activities.

Governments must therefore strengthen vocational education, digital training and employment support to prevent technological progress from increasing inequality.

Egypt's plans to train approximately 30,000 AI specialists, Jordan's investment initiative supporting more than 60 startups and Morocco's approximately $1.2 billion digital transformation commitment demonstrate how countries are developing domestic technological capabilities.

Beyond Billion-Dollar Investments: The Policies That Will Decide AI's Winners

For international development partners, the priority is helping countries overcome infrastructure shortages, skills gaps and weak institutions. Affordable computing access, digital public services, stronger regulations and financing for smaller businesses could generate significant development benefits.

The IMF estimates that restrictions on advanced technology could reduce potential AI-related growth gains by approximately 20% in low-income regional economies and 40% in the Caucasus and Central Asia.

Private firms could benefit from AI applications in financial services, agriculture, healthcare and energy. Banks can improve fraud detection, while energy companies can strengthen maintenance and operational efficiency.

Nevertheless, investors face risks from excessive infrastructure spending and uncertain commercial returns. One IMF downside scenario suggests that weaker technology investment and financial-market disruption could reduce GCC economic output by approximately 1% cumulatively over two years.

For governments, the central challenge is converting technological spending into measurable improvements in productivity, employment and competitiveness. Development institutions should prioritize projects with clear economic and social benefits, while private investors must carefully assess financial sustainability.

Ultimately, the report makes clear that AI's economic potential depends on more than investment. Countries combining technological access with workforce development, effective governance and competitive markets will be better positioned to achieve sustainable growth, stronger industries and more inclusive prosperity.