Saudi Economic Spotlight

Saudi equity prices have risen since the start of the Iran conflict, outperforming many regional and global markets. Whether this continues will depend on how and when the conflict ends.

The 2025 budget deficit was larger than expected. The 2026 deficit is also likely to exceed the budget target, but higher oil prices may help contain any overrun.

The Saudi government projects that the budget deficit will narrow during 2026-28, but this will depend on a rebound in oil prices and tight control of spending.

The $1 trillion Saudi trade and investment commitment to the United States will be extremely difficult to achieve given the size of the Saudi economy and its current financial situation.

The International Monetary Fund continues to endorse the direction of economic reform in Saudi Arabia but notes that risks from oil price uncertainty and strong credit growth will need to be carefully managed to keep the economy on a strong growth trajectory.

The Saudi current account moved into a small deficit in 2024 despite oil prices of $80 per barrel. A return to a surplus is unlikely unless oil revenue moves sharply higher.

The sharp drop in oil prices over the past week will result in a larger budget deficit and more government borrowing.

Robust growth in the non-oil economy and ongoing reforms are driving increased employment and labor force participation rates and lower unemployment among Saudi nationals.