ECONOMY

SAUDI KEEN TO TURN ECONOMIC UPSWING INTO SUSTAINED GROWTH

The Saudi government is maintaining its strong expansionary fiscal policy this year and in 2026 as it focuses on national priorities. The Ministry of Finance’s Pre-Budget Statement for Fiscal Year 2026 estimates total expenditures at around SAR 1.31 trillion and total revenues at SAR 1.15 trillion, with a deficit of 3.3% of GDP. 

The pre-budget statement highlighted that, since the launch of Vision 2030, the Saudi economy has undergone significant structural reforms, which led to improved business environment, stronger role for the private sector, and significant progress in achieving the kingdom’s sustainable development goals. Preliminary estimates for next year expect real GDP growth of about 4.6%, driven largely by continued expansion in non-oil activities.

The statement noted that the strong performance of non-oil sectors and ongoing government-led initiatives are seen yielding positive revenue trends over the medium term. Total revenues are projected to rise from SAR 1.15 trillion in 2026 to about SAR 1.3 trillion in 2028, while total expenditures are expected to grow from SAR 1.31 trillion to SAR 1.42 trillion over the same period. The accelerated implementation of key programmes and projects has enhanced financial flexibility, allowing the government to sustain a countercyclical fiscal stance and respond effectively to evolving conditions. 

Budget deficits are expected to persist over the medium term, though at gradually lower levels than the 2026 estimate, reflecting the government’s continued commitment to expansionary and transformative spending aimed at supporting high-impact projects and initiatives, while maintaining fiscal sustainability. 

The pre-budget statement also presented updated forecasts for 2025, projecting real GDP growth of 4.4%, supported by a 5.0% increase in non-oil activity. Growth is underpinned by stronger domestic demand and improved labour market conditions, which reduced Saudi’s unemployment rate to a record low of 6.8% in the second quarter of 2025.

RESILIENT FINANCIAL PLAN

The government also plans to continue its local and international financing activities through public and private channels – such as bond and sukuk issuances and loans – at competitive costs. In addition, it will expand alternative financing mechanisms, including project finance, infrastructure funding, and export credit agency facilities, in 2026 and over the medium term. 

Next year’s budget aims to reinforce the kingdom’s fiscal strength and ensure the sustainability of public finances, while supporting economic growth. Mohammed Aljadaan, Saudi’s minister of finance, stressed the government’s commitment to maintaining development and social spending priorities, and to advancing structural reforms that enhance eciency and sustainability. 

Public debt remains at relatively low and safe levels compared to many other economies, supported by solid financial reserves. This gives Saudi’s fiscal policy the flexibility to balance growth and sustainability goals, while retaining the capacity to respond to shocks or emergencies.

“In light of ongoing global uncertainty in 2026 and beyond, including potential geopolitical tensions and tighter preventive policies, the government continues to monitor and assess these risks carefully,” the minister of finance said. “This proactive approach is central to improving financial planning and ensuring that policies are well-positioned to mitigate potential global economic challenges and their negative impacts.” 

The government also remains focused on stimulating economic growth through continued investment in development projects and national strategies, targeted spending on high-impact priorities, and encouraging greater private sector participation in development activities, while maintaining long-term spending eciency and fiscal balance. 

Now on its eighth consecutive year, the pre-budget statement is part of the kingdom’s ongoing efforts to increase transparency and fiscal disclosure. It underscores the government’s progress in implementing reforms that have strengthened Saudi Arabia’s fiscal position amid a challenging global economic environment. 

STRONG ECONOMIC ACTIVITY

Meanwhile, Saudi business activity in September grew at its fastest rate since February, according to the latest Purchasing Managers’ Index (PMI) by S&P Global Ratings. 

The PMI signalled robust improvement in operating conditions across the non-oil private sector economy, which was also the strongest recorded performance since March.

“Central to the latest survey results was a marked improvement in business activity growth, as non-oil companies raised output levels to the greatest extent since February,” S&P stated in its September report. Around 27% of survey respondents reported an expansion, versus 1% noting a decline. 

The PMI data highlighted that companies expanded their hiring pace, driven by higher demand. Consequently, after two months of rising backlogs, overall work-in-hand levels were essentially stable.

“Businesses also showed greater optimism towards future activity in September, as year-ahead confidence rose for the second month running from July's recent low,” PMI data showed. “Firms expressed optimism due to expectations of higher demand, increased sales enquiries, successful marketing efforts and new client acquisitions.”