Saudi Arabia

After a slowdown in 2024 (+2% GDP growth), Saudi Arabia’s economy rebounded in 2025, with GDP expanding by +3.8%. Growth is expected to continue through 2026 at +3.9%, followed by +3.7% in 2027 The growth rebound was supported by increased oil production quotas, reaching 10.1mn barrels per day in November, and expected further increases in 2026 will push the economy higher. However, oil prices continued their decline in 2025, putting pressure on Saudi Arabia’s financing, and contributing to fiscal deterioration. Overall, oil remains the backbone of the economy, accounting for 68% of exports and 54% of fiscal revenue in 2025.

The non-oil economy, which now contributes just over half of gross value added, continued to expand through 2025 (+4.6% in Q2 2025), with the business activity PMI reaching its secondhighest level in over a decade. The services sector is set for strong growth as a result of diversification policies, with tourism being a key sector. Strategic investment will remain a key driver of growth, with the National Industrial Strategy targeting 36,000 factories by 2035, alongside major commitments with international mining companies. Risks include weaker oil prices, skills shortages and regional instability that could impede the implementation of Vision 2030. But domestic demand will underpin resilience.

Inflation remained subdued in 2025 at 2.2%, slightly above 1.7% in 2024. Going forward, we expect inflation to continue increasing up to 2.7% in 2026 as the USD depreciation has increased price tag of Saudi imports. We expect further 25bps rate cut by the Saudi Central Bank, following the Fed, in March, which could contribute to a further decrease in inflation. Threats to Fed independence remain a top risk for the USD-pegged region.

Saudi Arabia’s business environment has strengthened markedly since 2016, reflecting regulatory reforms and the government’s push to diversify the economy under Vision 2030. In the last 24 months, Saudi Arabia’s leadership has begun shifting some of its investment from mega-infrastructure projects to AI and tech-related ones, such as increasing data center capacity and investing in specific tech companies. While this shift should build greater productive capacity, it also exposes the country to global equity markets, which are currently very highly valued. The state remains central, but the privatization of major firms and opportunities for foreign investors in Saudi Aramco highlight a gradual shift toward greater private-sector participation. Competition policy, foreign direct investment (FDI) and the political climate have improved. A new Investment Law enacted in February 2025 ensures equal treatment of foreign and local investors, reinforcing fair competition. 

Strengths include a favorable taxation regime, technological readiness and economic stability. Market opportunities are expanding, supported by the Public Investment Fund’s infrastructure investments and diversification into manufacturing, tourism, mining and renewable energy. Weaknesses persist in the labor market, where shortages of skilled workers sustain reliance on expatriates despite Saudization efforts. Financing remains a challenge, with rising external debt and weak oil prices weighing on the Tadawul stock market. The overall index fell by 13% in 2025.