Saudi Economic Spotlight

The Saudi current account moved back into deficit in the second quarter of 2026, but the external sector position of the kingdom remains very strong.

The Saudi Ministry of Finance now expects a larger-than-budgeted fiscal deficit in 2026 as expenditure increases to support the economy.

The regional conflict has so far had a limited impact on the Saudi labor market.

The Saudi economy contracted sharply in the second quarter of 2026. Any recovery will be slowed by the recent renewal of hostilities in the region.

The Saudi budget recorded a large deficit in the first quarter of 2026 as spending surged, but higher oil revenue during the rest of the year should limit the size of the annual fiscal deficit.

Business conditions in the Gulf generally improved in April, but they remained weaker than before the Iran war. There are signs that price pressures are increasing as the conflict impedes trade.

Data shows that the Saudi economy is being negatively affected by the U.S.-Israeli war on Iran, and the impact will likely continue for the next few months at least.

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.