Saudi Economic Spotlight

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.

Aramco has announced it will pay a significantly lower dividend in 2025, which is bad news for the Public Investment Fund and the government, with the fiscal deficit in 2025 likely to be larger than budgeted.

Attracting foreign direct investment is a key goal of Vision 2030, but tracking progress in this important area is complicated by data revisions and questions about the data accuracy.

Revised data suggests that FDI into the nonhydrocarbon sector in Saudi Arabia has been on an upward trend since 2020.

Aramco’s high dividend payout may not be sustainable, and any decline in dividend payments would adversely affect the government budget and Public Investment Fund.