Saudi Economic Spotlight

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.

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.