Saudi Economy Overcomes Tariff Disruptions, Grows 2.7% in Q1 2025

The Saudi capital, Riyadh (SPA)
The Saudi capital, Riyadh (SPA)
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Saudi Economy Overcomes Tariff Disruptions, Grows 2.7% in Q1 2025

The Saudi capital, Riyadh (SPA)
The Saudi capital, Riyadh (SPA)

Despite heightened global uncertainty stemming from the sweeping tariff policies imposed by US President Donald Trump since April, which have disrupted major economies worldwide, the Saudi economy demonstrated remarkable resilience by achieving real GDP growth of 2.7% in the first quarter of 2025 year-on-year. This growth was primarily driven by a 4.2% increase in non-oil activities.

According to newly released data from the General Authority for Statistics (GASTAT), the growth figures coincide with the agency’s announcement of a comprehensive update to the GDP calculation methodology. The revisions are part of the Kingdom’s broader strategy to enhance economic transparency, improve the quality and reliability of statistical data, and align national economic indicators with global best practices to support developmental goals.

Preliminary estimates from GASTAT show that real GDP grew 2.7% in Q1 2025, compared to a contraction of 0.6% during the same period in 2024, though lower than the 4.4% growth recorded in Q4 2024. The current growth is attributed to the robust performance of non-oil sectors, alongside a 3.2% increase in government activity. Conversely, oil-related sectors declined by 1.4% year-on-year.

Economic Activity and Statistical Revisions

The updated GDP estimates for 2023 revealed a 14.1% increase from previous figures, equating to an added SAR 566 billion (USD 150.9 billion). Following the revision, the total GDP for 2023 now stands at SAR 4.5 trillion (USD 1.2 trillion).

The revised data also showed a significant increase in the contribution of the non-oil economy, now accounting for 53.2% of GDP—up 5.7% from earlier estimates. This is largely due to the expanded economic activity of small and medium-sized enterprises (SMEs).

Several economic sectors witnessed substantial growth, including construction (up 61%), wholesale and retail trade, restaurants and hotels (up 29.8%), and transportation, storage, and communications (up 25.6%), in addition to notable growth across various other sectors.

Quarterly Comparison

On a seasonally adjusted quarterly basis, real GDP grew by 0.9% in Q1 2025 compared to Q4 2024. This was driven by a 4.9% increase in government activity and a 1% rise in non-oil sectors, despite a 1.2% quarterly decline in oil activities.

Experts argue that Saudi Arabia’s ability to adapt to global economic disruptions - especially those triggered by US tariff policies - demonstrates the Kingdom’s resilience and capacity to sustain economic growth even under adverse conditions.

National Industries Drive Export Growth

Dr. Osama Al-Obaidi, advisor and professor of international commercial law, told Asharq Al-Awsat that the non-oil sector’s growth, despite global challenges such as US-China trade tensions and low oil prices, is a testament to the success of Saudi Arabia’s economic policies.

He attributed the significant increase in non-oil exports in Q1 2025 to a surge in chemical exports - particularly plastics, rubber, and related products - alongside a rise in re-exported goods. This growth also stems from the Kingdom’s voluntary oil production cuts in line with OPEC+ commitments, which reduced the share of oil exports in total trade.

“The growth in non-oil exports reflects the effectiveness of economic diversification under Vision 2030,” Al-Obaidi said. He highlighted the impact of large-scale investments in ports, such as King Abdulaziz Port in Dammam and Jeddah Islamic Port, as well as the development of domestic and international airports and logistics infrastructure. Government support for industries like chemicals, food, and pharmaceuticals has also opened new international markets for Saudi products.

Diversification and Business Climate

Economic researcher Fadwa Al-Buardi emphasized that the 2.7% year-on-year and 0.9% quarterly GDP growth rates are highly significant. She said they underscore the Saudi economy’s ability to navigate global challenges while successfully diversifying its income sources and reducing dependence on oil.

Al-Buardi added that these indicators demonstrate the effectiveness of development strategies and structural reforms under Vision 2030, which aim to strengthen the non-oil sector and ensure sustainable growth.

She also noted that improvements in the business environment, along with major development projects, infrastructure investments, and industrial sector expansion, will continue to boost GDP. Al-Buardi believes Saudi Arabia will remain committed to enhancing its investment climate, increasing non-oil exports, and achieving financial stability through a diversified and sustainable economy.

She highlighted that non-oil sector growth is being driven by economic diversification, private sector stimulation, infrastructure development, streamlined investment procedures, and increased investments in industrial, service, and tech sectors. Government initiatives and incentives have further supported entrepreneurship and attracted both domestic and foreign investors.

National Accounts Reform

The comprehensive GDP update reflects GASTAT’s ongoing efforts to provide more comprehensive, modern, and high-quality statistical data that supports decision-makers, policymakers, investors, and researchers at both domestic and international levels.

The authority has recently implemented several improvements in its national accounts statistics, most notably the adoption of a chain-linked volume index methodology to calculate real GDP growth based on previous-year weights and prices - aligned with international accounting standards.

GASTAT began this update project in early 2024 through a series of extensive surveys for 2023, including the comprehensive economic survey, household income and expenditure survey, and agricultural survey. Administrative data sources were also expanded.

Using this data, GASTAT developed more detailed supply and use tables and provided GDP estimates using production, income, and expenditure approaches, covering 134 economic activities, up from 85 previously.



Oil Slips as Iran-Israel Conflict Enters Sixth Day

FILE PHOTO: A view shows an oil pump jack outside Almetyevsk in the Republic of Tatarstan, Russia, June 4, 2023. REUTERS/Alexander Manzyuk/File Photo
FILE PHOTO: A view shows an oil pump jack outside Almetyevsk in the Republic of Tatarstan, Russia, June 4, 2023. REUTERS/Alexander Manzyuk/File Photo
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Oil Slips as Iran-Israel Conflict Enters Sixth Day

FILE PHOTO: A view shows an oil pump jack outside Almetyevsk in the Republic of Tatarstan, Russia, June 4, 2023. REUTERS/Alexander Manzyuk/File Photo
FILE PHOTO: A view shows an oil pump jack outside Almetyevsk in the Republic of Tatarstan, Russia, June 4, 2023. REUTERS/Alexander Manzyuk/File Photo

Oil prices fell on Wednesday, after a gain of 4% in the previous session, as markets weighed up the chance of supply disruptions from the Iran-Israel conflict and as they ponder a direct US involvement.

Brent crude futures fell 93 cents, or 1.2%, to $75.52 a barrel by 0918 GMT. US West Texas Intermediate crude futures fell 88 cents, also 1.2%, to $73.96 per barrel.

US President Trump warned on social media on Tuesday that US patience was wearing thin, and called for an "unconditional surrender" from Iran.

While he said there was no intention to kill Iran's leader Ali Khamenei "for now," his comments suggested a tougher stance toward Iran as he weighs whether to deepen US involvement.

A source familiar with internal discussions said one of the options Trump and his team are considering included joining Israel on strikes against Iranian nuclear sites.

A direct US involvement threatens to widen the confrontation further, putting energy infrastructure in the region at higher risk of attack, analysts say.

"The biggest fear for the oil market is the shutdown of the Strait of Hormuz," ING analysts said in a note.

"Almost a third of global seaborne oil trade moves through this chokepoint. A significant disruption to these flows would be enough to push prices to $120 [a barrel]," the bank added.

Iran is OPEC's third-largest producer, extracting about 3.3 million barrels per day (bpd) of crude oil.

Meanwhile, Iranian ambassador to the United Nations in Geneva Ali Bahreini said on Wednesday that Tehran has conveyed to Washington that it will respond firmly to the United States if it becomes directly involved in Israel's military campaign.

Markets are also looking ahead to a second day of US Federal Reserve discussions on Wednesday, in which the central bank is expected to leave its benchmark overnight interest rate in the range of 4.25% to 4.50%.

However, the conflict in the Middle East and the risk of slowing global growth could potentially push the Fed to cut rates by 25 basis points in July, sooner than the market's current expectation of September, said Tony Sycamore, market analyst with IG.

Lower interest rates generally boost economic growth and demand for oil.

Confounding the decision for the Fed, however, is the Middle East conflict's potential creation of a new source of inflation via surging oil prices.

US crude stocks fell by 10.1 million barrels in the week ended June 13, market sources told Reuters, citing American Petroleum Institute figures on Tuesday. Official Energy Information Administration data is due later on Wednesday.