Saudi Arabia is aiming for stronger economic growth in 2025 and 2026. A new report by Riyad Capital shows that the country’s economy is expected to grow by 3.5 percent in 2025 and 4.2 percent in 2026. This growth will be supported by an increase in oil production and strong performance in non-oil sectors.
The oil sector is set to recover after OPEC’s decision to reduce voluntary output cuts during the second half of 2025. Riyad Capital forecasts oil activity in the Kingdom to grow by 3.5 percent next year and rise further by 5.4 percent in 2026. Even though global oil prices have been low, Saudi Arabia is focusing on raising output to support economic growth instead of waiting for price increases.
Non-oil sectors will also continue to play a key role in Saudi Arabia’s economic plans. Growth in these sectors is expected to reach 4.1 percent in 2025 and 4.3 percent in 2026. This growth is being driven by strong government spending, major public investment projects led by the Public Investment Fund, and increased borrowing by businesses.
In the first quarter of 2025, government spending rose by 5.4 percent compared to the same time last year. However, revenues fell by 10.2 percent. This created a budget deficit of SAR 59 billion. Riyad Capital predicts the deficit will be 4.5 percent of GDP in 2025 but will shrink to 3.6 percent in 2026. Most of the deficit will be covered by borrowing. Despite this, the country’s debt is expected to stay at a safe level of around 32.5 percent of GDP by 2026.
Saudi Arabia is also dealing with a current account deficit due to lower oil export income and higher imports. In 2025, the current account deficit is expected to be 3.6 percent of GDP. It is projected to improve to 2.9 percent in 2026 as oil exports increase and tourism revenues grow.
Inflation in Saudi Arabia is expected to remain low. It may rise slightly to 2.5 percent in 2025 and then fall to 2.3 percent in 2026. These numbers are still within a stable and safe range. At the same time, interest rates are likely to go down. The United States is expected to cut rates in late 2025, which would also lower the Saudi 3-month interbank rate, known as SAIBOR. This rate could fall from its current level of 5.35 percent to 4.75 percent by the end of 2025.
The government continues to support economic growth through its Vision 2030 plan. This strategy aims to reduce the country’s reliance on oil by investing in other areas like tourism, education, health, and technology. These changes are helping to create a more diverse and stable economy for the future.
Overall, Saudi Arabia is on track for solid economic progress over the next two years. Both oil and non-oil sectors are expected to grow. Fiscal and trade deficits remain manageable. Inflation and interest rates are under control. With strong policies and long-term planning, the country is building a more balanced and resilient economy.
