Saudi Arabia’s economy has once again demonstrated the strength of its fundamentals and its ability to withstand regional shocks, posting real GDP growth of 3 percent year-on-year in the first quarter of 2026, despite escalating tensions across the Middle East that have disrupted supply chains and global trade flows.
The final official figures surpassed the earlier flash estimate of 2.8 percent. The upward revision reflected higher estimates from the General Authority for Statistics (GASTAT), which raised growth projections for both oil and non-oil activities to 2.9 percent. The Kingdom had recorded growth of 5.2 percent in the fourth quarter of 2025.
Saudi Arabia’s performance amid logistical challenges, including shipping disruptions through the Strait of Hormuz, recently received backing from an International Monetary Fund mission.
Following consultations in Riyadh, IMF experts said the Kingdom had successfully mitigated the effects of regional conflict and eased logistical bottlenecks through resilient infrastructure, the rapid deployment of the East-West pipeline and Red Sea ports, and strong financial buffers provided by the Public Investment Fund and a stable banking sector.
The IMF nevertheless revised its 2026 growth forecast for Saudi Arabia to 2 percent from a previous estimate of 3.1 percent, citing regional instability.
Broad-based expansion
According to GASTAT, first-quarter growth was driven by gains across all major sectors of the economy. Oil and non-oil activities each expanded 2.9 percent year-on-year, while government activities rose 1.5 percent.
On a seasonally adjusted basis, real GDP declined 1.2 percent from the fourth quarter of 2025, reflecting a 6.8 percent contraction in oil activities. Government and non-oil sectors, however, continued to post quarterly growth of 1.4 percent and 0.3 percent, respectively.
Financial services, insurance and business services recorded the strongest performance among detailed sectors, growing 5.4 percent year-on-year and 1.1 percent quarter-on-quarter.
Manufacturing activities, excluding oil refining, expanded 4 percent annually. Crude oil and natural gas activities grew 3.6 percent from a year earlier, despite a 7 percent quarterly decline linked to shipping disruptions.
Consumption and investment remain strong
Government final consumption expenditure rose 11.3 percent year-on-year and 8.5 percent quarter-on-quarter, while private consumption increased 5.3 percent annually.
Gross fixed capital formation climbed 3.9 percent year-on-year and 7.5 percent quarter-on-quarter, underscoring continued investment momentum. Exports increased 1.4 percent from a year earlier, while imports fell 5.5 percent.
Non-oil activities remained the primary driver of economic growth, contributing 1.7 percentage points to overall GDP expansion. Oil activities added 0.8 percentage points, while government activities and net taxes contributed 0.3 and 0.2 percentage points, respectively.
The IMF also praised the Saudi Central Bank (SAMA) for maintaining a countercyclical capital buffer of 100 basis points, noting that the Saudi riyal’s peg to the US dollar continues to bolster monetary-policy credibility and financial stability.
On structural reforms, the fund welcomed the recalibration of the Public Investment Fund’s 2026-2030 strategy, aimed at allocating capital more selectively and encouraging greater private sector participation.
It said continued progress toward the objectives of Vision 2030, including deeper capital markets, stronger alignment between education and labor market needs, and broader adoption of artificial intelligence and logistics technologies, remains essential to achieving sustainable economic diversification and safeguarding prosperity for future generations.
