ECONOMY

Saudi Arabia’s economy returned to growth in 2024, with real GDP rising by 1.3% compared to the previous year, according to preliminary government data. The recovery was largely driven by the non-oil sector, which lifted overall economic activity.

GDP grew by 4.4% year-on-year in the fourth quarter – the fastest quarterly expansion in two years – while non-oil activity rose by 4.6%, according to estimates from the General Authority for Statistics (GASTAT). Throughout 2024, non-oil growth significantly outpaced overall GDP, increasing by 4.3%, whereas oil sector activity declined by 4.5%, and government-related activities expanded by 2.6%.

The Saudi economy had contracted by 0.8% in 2023 due to oil production cuts and lower crude prices, which impacted its growth. Ongoing OPEC+ output cuts have continued to weigh on Saudi’s GDP, influencing forecasts for the coming years.

The International Monetary Fund (IMF) has revised its 2025 growth forecast for the country downward to 3.3%, citing extended oil production cuts, and has also lowered its estimate for 2026. For 2024, the IMF had projected a 1.4% expansion, higher than the Saudi government’s own estimate of 0.8%. 

RATINGS OUTLOOK

Fitch Ratings has reaffrmed Saudi Arabia’s long-term foreign-currency issuer default rating (IDR) at ‘A+’ with a stable outlook, on the back of the country’s strong fiscal and external balance sheets. The kingdom’s financial position remains solid, with government debt levels and net foreign assets significantly stronger than the median for both ‘A’ and ‘AA’ rated countries. The ratings agency also noted that Saudi benefits from substantial fiscal buers, including deposits and public sector assets.

Efforts under Vision 2030 are driving economic diversification, supported by high levels of public spending.

The agency added that Saudi Arabia’s external finances remain robust, with foreign reserves covering 14.4 months of external payments in 2024, far exceeding the ‘A’ median of 1.9 months. Net foreign assets stood at 63.7% of GDP, compared to a median of 8.7% for countries in the same rating category. While a small current account surplus of 0.2% of GDP was recorded in 2024.

Fitch expects the country to run deficits in 2025 and 2026, averaging 2.4% of GDP. Lower oil prices will reduce revenues, despite an expected increase in production as OPEC+ cuts are gradually phased out. At the same time, strong import growth, driven by project execution, will continue. Growth in non-oil exports is expected to remain robust, while the services deficit should narrow further, supported by a growing tourism sector. 

The Saudi government anticipates a budget deficit of 2.8% of GDP in 2024, up from 2% in 2023, as expenditure growth outpaces revenue gains. Oil revenues were lower due to OPEC+ production cuts, and Fitch estimates that the fiscal breakeven oil price will be around USD 96 per barrel in 2024. 

The deficit is forecasted to widen further to 3.8% of GDP in 2025, as oil revenues decline. The government’s medium-term budget forecasts show a rising deficit, reaching 2.9% in 2026 and 3% in 2027.

GROWTH IN 2025

Economic growth is expected to rebound in 2025 after being constrained by oil production cuts in 2024. Preliminary estimates suggest that Saudi Arabia’s real GDP grew by 1.3% in 2024, with the oil sector contracting by 4.5%, Fitch noted.

Oil production is projected to increase in line with OPEC+ agreements from December 2024, leading to a 2.7% expansion in the oil sector in 2025 and a further 6.4% in 2026.

Meanwhile, non-oil GDP growth remains strong, diverse, and resilient to fluctuations in oil prices. Growth in this sector was 4.3% in 2024, driven by wholesale and retail trade, transport, and construction. This momentum is expected to continue in 2025 and 2026, supported by economic reforms and high levels of public and private investment. 

Inflation has remained low, averaging 1.7% in 2024, and is expected to stay below 2% in the coming years due to the kingdom’s stable currency, negative output gap, and adjustments in government projects.