- Saudi Arabia’s GDP growth expected at 4.3pc, driven by stronger oil output and resilient non-oil
According to the Saudi economic experts, Saudi Arabia’s economy is expected to accelerate in 2025, buoyed by higher oil production and resilient non-oil activity. The forecast points to 4.3 percent GDP growth, a sharp improvement from 2 percent in 2024, as the Kingdom benefits from an anticipated 5.3 percent rebound in oil activity alongside a 4.6 percent expansion in non-oil sectors.
However, the stronger growth outlook is accompanied by a widening fiscal gap. In this year, the government deficit is projected to reach 4.3 percent of GDP, as against to 2.5 percent last year, as spending commitments and lower oil prices weigh on state finances. In nominal terms, the deficit could expand to SAR197 billion. Public debt is also expected to climb to 31.6 percent of GDP, up from 25.8 percent in 2025.
No doubt, the economy of Saudi Arabia is high-income, developing, and is highly reliant on its petroleum sector. Oil & gas account for approximately 22.3 percent of Saudi GDP and 55 percent of government revenue, with substantial fluctuations depending on oil prices each year. It is said that the kingdom has the second-largest proven petroleum reserves, and the fourth-largest measured natural gas reserves. Saudi Arabia is currently the largest exporter of petroleum in the world.
In 2016, the Saudi government launched its Saudi Vision 2030 program to reduce its dependency on oil and diversify its economic resources. By 2022, Saudi Arabia had only modestly reduced its dependence on oil. In 2025, Saudi oil output is forecast to increase to 9.5 million barrels per day, up from 9 million in 2024, amid expectations of gradual recovery in worldwide demand. Still, oil price assumptions remain soft, with Brent averaging $69 per barrel in 2025, down from $79.9 in 2024. This weaker pricing environment, coupled with robust import demand, is set to narrow the trade surplus to SAR198 billion (4.3 percent of GDP), sharply down from SAR339 billion in 2024. The current account balance is forecast to swing deeper into deficit, reaching SAR172 billion or 3.7 percent of GDP.
Furthermore, in this year, inflation is expected to average 2.3 percent, slightly higher than this year’s 1.7 percent, while interest rates are projected to ease as global monetary policy shifts. The 3-month SAIBOR is forecast to fall from 5.54 percent in 2024 to 4.85 percent in this year, with the official repo rate easing to 4.5 percent. On the labour front, the outlook continues to enhance. Overall unemployment is expected to drop to 2.8 percent, while Saudi national unemployment is seen at 6.3 percent, reflecting progress in labour market reforms and private-sector job creation.
Economic experts of the country also analyzed that a balancing act for Saudi policymakers. Stronger oil output and sustained non-oil expansion will underpin growth, but rising deficits, higher debt levels, and a weaker external position pose risks to fiscal sustainability. With Vision 2030 reforms continuing to diversify the economy, the near-term challenge stays ensuring that higher growth does not come at the cost of fiscal discipline.
Furthermore, despite the downturn, economic experts expect the market to gradually recover over the second half of the year, supported through potential worldwide interest rate cuts, stabilizing oil prices, easing economic unrest and forecasts of robust growth in Saudi Arabia’s GDP and the non-oil sector, alongside continued government spending on major projects. The Saudi stock market registered notable losses in the first six months of 2025, with the benchmark index retreating 7.25 percent, shedding 872 points to end at 11,163, as against to 12,036 at the close of 2024.
Market capitalization plunged by almost $266 billion (SAR 1.07 trillion), bringing the total value of listed shares to SAR 9.1 trillion. Seventeen sectors posted falls during this period, led by utilities, which plummeted nearly 32 percent. The energy sector fell 13 percent, and basic materials dropped 8 percent. In contrast, telecom stocks advanced around 7 percent, while the banking sector eked out a marginal 0.05 percent gain. It is important to note that Saudi Arabia’s 2025 budget anticipates SAR 1.184 trillion in revenue and SAR 1.285 trillion in expenditure, projecting a deficit of SAR 101 billion (2.3 percent of GDP) to fund Vision 2030 projects and economic diversification, with a strong focus on private sector growth and investment.
Major sectors receiving large allocations include military, health, and education, with significant growth in non-oil economic activities driving GDP expansion to an estimated 4.6 percent. Experts also recorded that in 2026, the non-oil economy is expected to continue its robust growth trajectory, supported through various drivers of economic activity and the Kingdom’s focus on delivering Vision 2030 goals. Strong demand for domestic goods and services from businesses, residents and tourists will support economic momentum. The domestic market will advantage from increased consumption, which will be further supported through larger project activity, mainly in infrastructure, construction, and real estate sectors.
Moreover, tourism should see more expansion, fueled through worldwide events and cultural developments. It is also recorded that this upward trend in visitors will stimulate demand across hospitality, entertainment, retail, and transportation sectors, further diversifying and strengthening the local economy. While the domestic fundamentals are strong, there are a number of risks to the outlook, counting the evolution of oil prices, the potential for protectionist policies to disrupt global trade, higher-for-even longer interest rates, a sharper slowdown in China’s economy and geopolitical events. Implementing such a large pipeline of investments and projects will also present logistical and financial problems along the way.