The World Bank affirmed on Thursday that Saudi Arabia's economy has gained significant momentum for 2026-2027, driven by robust non-oil sector expansion under Vision 2030.
In a report titled “The Gulf’s Digital Transformation: A Powerful Engine for Economic Diversification,” the World Bank said growth is expected to persist in the Kingdom with non-oil activities expanding by 4% on average.
The report lifted its forecast for Saudi Arabia’s real GDP growth to 3.8% in 2025 compared to a 3.2% last October.
The forecast represents a major upward revision affirming the resilience of the Saudi economy and its ability to absorb external volatility. It also indicates growing confidence in the effectiveness of ongoing structural reforms within Vision 2030.
On Tuesday, Saudi Arabia approved its state budget for 2026, projecting real GDP growth of 4.6% in 2026.
The report showed that in the Kingdom, economic momentum is strengthening across oil and non-oil sectors with non-oil activities expanding by 4% on average and oil activities expanding by 5.4%, bringing overall real growth to an average of 4.3%.
It said oil activities grew by 1.7% y/y in the first half of 2025, benefiting from the phase-out of OPEC+ voluntary production cuts starting in April 2025.
At the financial level, the fiscal deficit between 2025 and 2027 is projected to remain at an average of 3.8% of GDP.
Meanwhile, the current account balance slightly recovered, settling at 0.5% of GDP in the first quarter of 2025 against -2.6% in the second half of 2024.
The report said real GDP growth remained stable at 3.6% y/y in the first half of 2025, thanks to the stabilization of the oil sector and sustained non-oil growth.
Non-oil activities expanded by 4.8% over the period, in line with the performance of 2024 while non-oil growth was driven by the wholesale, retail trade, restaurants, and hotels sector (+7.5% y/y in the first half of 2025), consolidating the role of hospitality and tourism as engines of economic diversification.
The report also indicated that oil activities grew by 1.7% y/y in the first half of 2025, benefiting from the phase-out of OPEC+ voluntary production cuts starting in April 2025.
These trends are expected to persist in 2026-2027, with non-oil activities expanding by 4% on average and oil activities expanding by 5.4%, bringing overall real growth to an average of 4.3%.
Job Market and Inflation
The report said the labor market mirrors the stabilization of the real economy and is rapidly becoming more inclusive to women.
Overall unemployment decreased by 0.7 point between the first quarter of 2024 and the first quarter of 2025, with the female unemployment rate dropping from 11.8% to 8.1% over the same period.
Also, inflation remained low and stable in Saudi Arabia, settling at an average of 2.2% in the first half of 2025.
However, price increases have been concentrated in the housing and utilities sector as rental prices have become a key issue, largely because rental supply has failed to match demographic growth, especially in Riyadh.
While this reflects the government’s efforts to dynamize the Kingdom’s urban centers, the price increases prompted the government to freeze rental prices in Riyadh for the next five years, as anticipated increases in housing supply should help control rental prices.
Finally, the report said Saudi Arabia’s external position stabilized in the second half of 2024 and the first quarter of 2025.
Although net foreign direct investment has remained relatively stable, the World Bank has emphasized that recent changes in foreign ownership regulations in Saudi Arabia, coupled with continued structural reforms, are positive steps to attract greater flows of foreign direct investment (FDI).
