DATA UNDERSCORE SAUDI ECONOMY’S UPWARD MOMENTUM

Saudi Arabia’s economy has maintained its strong momentum despite facing a myriad of challenges including global uncertainty, declining commodity prices, and OPEC+ production constraints, according to the latest International Monetary Fund (IMF) report. 

The kingdom’s non-oil GDP expanded 4.5% in 2024 – driven by the retail, hospitality, and construction sectors – offsetting a 4.4% contraction in oil GDP and keeping overall growth at 2%. Inflation remains contained, unemployment is at record lows, and female and youth labour force participation rates have doubled over the past four years.

And the outlook is strong. The IMF expects Vision 2030 investments, government-led projects, and major international events to keep non-oil growth above 3.5% in the medium term, with overall GDP forecast to accelerate to 3.9% by 2026 as OPEC+ cuts unwind. Inflation is projected to remain stable, though fiscal and current account deficits are likely to persist, requiring continued access to diversified financing sources.

Fiscal and external buffers also remain at healthy levels. The banking sector is well-capitalised and profitable, with non-performing loans at their lowest since 2016. However, the current account shifted into a 0.5% of GDP deficit in 2024, financed through a mix of external borrowing and reduced foreign asset accumulation – reflecting elevated investment-linked imports and remittances. 

The IMF recommends maintaining a countercyclical fiscal stance in the near term, supported by ample buers, while pursuing gradual consolidation over the medium term to ensure intergenerational equity. Key measures include broadening the tax base, reforming subsidies, improving targets of social safety nets, and streamlining non-essential expenditures. 

OIL RECOVERY ON THE HORIZON

In the oil sector, production is projected to recover gradually, reaching 11 million barrels per day (bpd) by 2030. This level, while remaining below the maximum sustainable capacity of 12.3 million bpd, is consistent with market expectations based on prevailing demand and supply dynamics. 

The non-oil sector is expected to record a modest acceleration in 2027, supported by stepped-up investments in new infrastructure and upgrades to existing facilities. These projects are being undertaken in preparation for Saudi Arabia’s hosting of several major international events, including the 2027 Asian Cup, the 2029 Asian Winter Games, the 2030 World Expo, and the 2034 FIFA World Cup. Stronger inflows of labour – particularly in the construction sector – along with increased tourism activity, are anticipated to further bolster economic activity. 

WOMEN DRIVE LABOUR MARKET GROWTH

The unemployment rate for Saudi nationals fell to a historic low of 7% in the fourth quarter of 2024, surpassing the original Vision 2030 target well ahead of schedule. In light of this achievement, the target has now been revised downward to 5%. The improvement in labour market conditions has been broad-based, with unemployment rates for both youth and women halving over the past four years.

Private sector employment grew strongly in 2024, recording an average increase of 12%, largely driven by rising female participation in the workforce. The construction sector saw a sharp 24% expansion in its labour force. Meanwhile, hiring in the public sector continued to slow, reflecting a deliberate redeployment of workers to non-government entities and the implementation of a partial hiring freeze.

STRUCTURAL REFORMS

The IMF recommends ongoing structural reforms, such as improving the kingdom’s business environment, enhancing fiscal transparency, expanding financing for small and medium enterprises (SMEs), and deepening capital markets to help sustain economic diversification. A newly implemented pension reform should also strengthen long-term fiscal sustainability.

“Significant and wide-ranging reforms – particularly in business regulations, investment effciency, governance, labour, digitalisation and capital markets – will help enhance private sector development and promote economic diversification,” the IMF noted in its report. “The reform momentum should be accelerated amid high uncertainty, irrespective of oil price developments.

IMPRESSIVE GROWTH IN Q2

Real GDP grew by 3.9% in the second quarter of 2025 compared to the same period in 2024, according to a flash estimate by the General Authority for Statistics (GASTAT). Non-oil activities recorded a growth of 4.7%, oil activities grew by 3.8%, while government activities increased by 0.6%, according to the publication’s results.

Preliminary data also showed that seasonally adjusted real GDP increased by 2.1% compared to Q1 of 2025. Oil activities recorded a growth of 5.6%, non-oil activities increased by 1.6%, while government activities decreased by 0.8%. 

Meanwhile, the Consumer Price Index (CPI) remained relatively muted at 0.2% in June 2025 compared to May 2025. The kingdom’s annual inflation rate also rose 2.3% in June 2025 compared to the same month of the previous year.