The International Monetary Fund (IMF) has confirmed that Saudi Arabia’s economy has demonstrated remarkable resilience in the face of global disruptions, with non-oil activities continuing to expand and inflation remaining contained. The IMF also noted a historic decline in unemployment rates, underscoring the strength of the Kingdom’s economic fundamentals.
In a statement concluding its Article IV mission to Saudi Arabia - a review welcomed by the Ministry of Finance - the Fund noted that despite the challenges posed by lower oil revenues and higher investment-related imports, which resulted in a dual deficit, the country still maintains significant external and fiscal buffers. The Fund added that the current fiscal expansion beyond the budgeted plans remains appropriate, supporting growth in non-oil sectors.
According to the IMF, non-oil real GDP grew by 4.2 percent in 2024, driven mainly by robust private consumption and rising non-oil investments. Although oil production decreased to 9 million barrels per day, the overall economy expanded by 1.8 percent last year. Preliminary estimates for the first quarter of 2025 indicate non-oil GDP accelerated further, rising 4.9 percent year-on-year. Previously, the IMF had projected Saudi Arabia’s total GDP growth at 1.5 percent for 2024.
Higher-than-planned spending widened the fiscal deficit to 2.5 percent of GDP in 2024, surpassing initial targets. Still, the non-oil primary balance improved modestly, narrowing by 0.6 percentage points. Central government debt rose to 26.2 percent of GDP. However, the Kingdom remains among the least indebted countries globally, with net debt below 17 percent.
The Fund expects domestic demand, including large-scale government projects, to continue as the main growth engine, even as global uncertainties mount and commodity price forecasts soften. For 2025, non-oil real GDP is projected to grow by 3.4 percent, supported by Vision 2030 initiatives and strong credit expansion.
Over the medium term, the Fund anticipates non-oil growth will rise to about 4 percent by 2027, then gradually moderate to 3.5 percent by 2030. The Kingdom’s hosting of major international events is expected to sustain this momentum.
On trade risks, the IMF noted that the direct impact of global trade tensions should remain limited. Oil products, which accounted for 78 percent of Saudi exports to the United States in 2024, are exempt from US tariffs, while non-oil exports to the American market represent only 3.4 percent of the Kingdom’s total non-oil shipments.
Inflation is expected to remain contained around 2 percent, thanks to the riyal’s peg to the US dollar and the credibility of Saudi monetary policy.
Externally, the current account deficit is projected to widen, peaking near 3.9 percent of GDP by 2027, before easing to 3.4 percent in 2030. This increase largely reflects higher imports linked to investment projects and greater remittances. Nonetheless, Saudi Arabia’s international reserves are anticipated to stay robust.
The Fund warned that weaker oil demand, intensifying trade frictions, or deeper geoeconomic fragmentation could weigh on oil revenues. Such shocks could widen fiscal deficits, raise debt, and increase borrowing costs. However, higher oil prices or accelerated reform implementation could yield stronger growth.
On fiscal policy, the IMF judged the current expansionary approach appropriate, estimating the overall fiscal deficit will rise to 4.3 percent of GDP in 2025. This figure masks improvements in the non-oil primary balance, which is projected to strengthen by 3.6 percentage points relative to non-oil GDP. Over the medium term, the fiscal deficit is expected to decline gradually, falling to about 3.3 percent of GDP by 2030. This adjustment would be driven by efforts to contain the public wage bill and improve spending efficiency. During this period, the non-oil primary deficit should narrow by around 4.2 percent of non-oil GDP.
The Fund anticipates that these deficits will be financed primarily through borrowing, including debt issuance and bank loans, with public debt rising to about 42 percent of GDP by the end of the decade. To ensure intergenerational fairness and fiscal sustainability, the IMF emphasized the importance of gradually tightening fiscal policy over the medium term. It recommended raising additional non-oil revenue equivalent to about 3.3 percent of non-oil GDP between 2026 and 2030.
The Fund welcomed government plans to increase taxes on undeveloped land and broaden the value-added tax base, alongside recent adjustments in energy prices. It also urged authorities to accelerate the phase-out of energy subsidies, including removing the gasoline price cap.
Additionally, the IMF supported ongoing reviews of public spending to deliver savings and improve efficiency, with an emphasis on reducing low-impact recurrent expenditure.
Turning to monetary policy and the banking sector, the IMF reaffirmed that the currency peg to the US dollar remains appropriate, underpinned by large foreign reserves and high credibility. The Saudi Central Bank is expected to keep its policy rate aligned with the US Federal Reserve.
The Fund welcomed the Central Bank’s efforts to review prudential tools to contain risks from rapid credit expansion and called for continued vigilance to preserve financial stability. It also praised regulatory reforms, including the new banking law and the development of a risk-based supervisory framework.
Finally, the IMF underscored the critical role of structural reforms in sustaining non-oil growth and diversifying the economy. It noted that Saudi Arabia has implemented wide-ranging changes in corporate regulation, governance, labor markets, and the financial sector.
New measures, such as the updated investment law and labor law amendments, are expected to boost investor confidence and productivity. The Fund encouraged further efforts to strengthen human capital, enhance access to finance, and advance digital transformation, including integrating artificial intelligence into public services.
