Saudi Arabia’s first-quarter 2026 budget performance figures showed the government remained firmly committed to development and social spending, with total expenditure surging 20 percent year on year to about SAR387 billion ($103.2 billion), compared with SAR322 billion in the same period a year earlier.
The spending drive reflects a broader strategy to strengthen the Kingdom’s economic resilience, going beyond traditional support measures to focus heavily on securing supply chains, localizing strategic industries and building financial buffers aimed at shielding domestic growth from external geopolitical shocks.
Revenue resilience and growing non-oil income
Saudi Arabia’s Finance Ministry said in its quarterly report that total revenue reached SAR261 billion ($69.6 billion). Although overall revenue edged down 1 percent due to a roughly 3 percent decline in oil revenue to SAR145 billion ($38.6 billion), non-oil revenue maintained positive momentum, rising 2 percent annually to SAR116 billion ($30.9 billion).
Taxes on goods and services remained the largest contributor to non-oil revenue at SAR74.9 billion ($20 billion), underscoring the success of policies aimed at diversifying income sources and reducing direct exposure to oil-market volatility.
The figures highlight the Saudi economy’s ability to maintain stable cash flows despite turbulence in global markets, resulting in a budget deficit of SAR126 billion ($33.6 billion), which the ministry described as a necessary investment to support future growth.
According to the International Monetary Fund (IMF), the impact of the war on Saudi Arabia appears less severe than on other Gulf states despite downgraded forecasts. The Saudi economy is still expected to grow by 3.1 percent after a 1.4-percentage-point cut from the IMF’s January projections, indicating the region’s largest economy remains capable of absorbing external shocks.
The World Bank, meanwhile, forecast Saudi Arabia’s budget deficit would narrow to 3 percent of gross domestic product in 2026, while the current account is expected to post a surplus of 3.3 percent, compared with an earlier forecast of a 2.7 percent deficit.
Finance Minister Mohammed Al-Jadaan has previously said not all budget deficits should be viewed negatively, distinguishing between what he described as “good” and “bad” deficits. He said a “bad” deficit fails to generate growth and merely increases future liabilities, while a “good” deficit finances strategically important projects that stimulate growth, including infrastructure, logistics, airports, ports and railway networks that encourage private-sector investment and help lower financing costs.
Social stability as the first line of defense
The 12 percent increase in spending on health and social development to SAR81 billion ($21.6 billion) reflected what officials described as a preemptive policy aimed at shielding citizens from the effects of global inflation driven by wars and geopolitical tensions.
Similarly, the allocation of SAR31 billion ($8.2 billion) for social benefits is intended to preserve purchasing power, helping explain why inflation remained moderate at 1.8 percent and point-of-sale transactions rose 4.4 percent despite regional instability.
At the same time, spending on infrastructure and transport rose sharply by 26 percent to SAR12 billion ($3.2 billion), supporting Saudi ambitions to become a global logistics hub linking continents.
Public debt management and financing sources
The report also highlighted what it described as efficient management of financing requirements during the first quarter of 2026. The entire deficit of SAR125.7 billion ($33.5 billion) was financed through debt issuance without drawing on government reserves, which stood at SAR400.9 billion ($106.9 billion).
The approach is consistent with the Finance Ministry’s stated policy of preserving reserves as a pillar of fiscal strength while managing deficits through diversified financing tools under a medium-term debt strategy aimed at keeping debt levels at about 32.7 percent of GDP.
Total public debt reached SAR1.667 trillion ($444.6 billion) at the end of the first quarter. Domestic debt accounted for SAR1.042 trillion ($278.1 billion), while external debt stood at SAR624.4 billion ($166.5 billion).
International markets continued to show strong confidence in the Saudi economy. A dollar-denominated bond sale in early January worth $11.5 billion attracted more than $28 billion in orders, as the ministry pursued plans to raise between $14 billion and $17 billion in international borrowing this year while gradually slowing the pace of sovereign bond sales abroad.
The current account balance stood at SAR67.7 billion ($18 billion) at the end of the same period.
Confidence indicators and private-sector momentum
The positive performance extended beyond public finances to broader macroeconomic indicators pointing to strong economic resilience. Foreign reserve assets rose 10 percent to SAR1.786 trillion ($476.2 billion) by the end of February 2026.
The labor market also showed structural gains, with the number of Saudi nationals employed in the private sector increasing by about 139,500 workers, bringing the total number of Saudis employed in the sector to 2.5 million.
Momentum in the private sector was reinforced by an 8.8 percent rise in bank lending to businesses, reflecting confidence among banks and investors in the Kingdom’s economic outlook.
Digital transformation and monetary stability
As part of the shift toward a digital economy, e-commerce sales surged 42.6 percent, while point-of-sale transactions increased 4.4 percent to reach SAR189.7 billion ($50.5 billion).
Despite the strong pace of economic activity, inflation remained relatively stable at 1.8 percent, helping protect purchasing power and support household financial stability.
With the purchasing managers’ index remaining above the neutral threshold at 53.7 points and industrial production rising 9.8 percent, official reports expect Saudi gross domestic product to expand by about 4.6 percent in 2026, driven by the combined strength of oil and non-oil activities under continuing structural reforms.
