Analysts to Asharq Al-Awsat: Policy Flexibility Strengthens Saudi Arabia’s Ability to Withstand Shocks

A view of Riyadh’s Financial District from the metro. (SPA)
A view of Riyadh’s Financial District from the metro. (SPA)
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Analysts to Asharq Al-Awsat: Policy Flexibility Strengthens Saudi Arabia’s Ability to Withstand Shocks

A view of Riyadh’s Financial District from the metro. (SPA)
A view of Riyadh’s Financial District from the metro. (SPA)

The International Monetary Fund (IMF) has raised its forecast for Saudi Arabia’s economy, projecting GDP growth of 5.5 percent in 2027, supported by a recovery in both the oil and non-oil sectors and continued strength in consumption and investment.

Economists said the Kingdom’s sound public finances and accelerating non-oil activity have strengthened its ability to sustain growth despite geopolitical challenges.

The IMF had forecast growth slowing to 1.7 percent in 2026 because of the impact of the Middle East conflict and shipping disruptions through the Strait of Hormuz. It expects the economy to regain momentum the following year as economic activity improves and projects under Saudi Vision 2030 continue to advance.

Naif Alghaith, chief economist at Riyad Bank, told Asharq Al-Awsat that the Saudi economy is likely to exceed 5 percent growth in 2027, driven by the continued strength of non-oil activities, which now account for more than half of GDP, supported by domestic demand, investment projects and Vision 2030 programs.

The tourism, construction, services and trade sectors are poised for further growth alongside improving trade and shipping activity and a recovery in oil production and exports, he added.

“These transformations have helped build a more resilient and robust economy capable of absorbing external shocks and maintaining a sustainable growth trajectory,” he remarked.

A more resilient economy

According to Alghaith, the IMF report clearly reflects the strength of the Saudi economy and its high capacity to withstand external shocks.

The Kingdom demonstrated its resilience during recent geopolitical tensions thanks to strong economic fundamentals and advanced infrastructure, he stressed.

Long-term investments in ports and logistics enabled oil and non-oil shipments to be rerouted efficiently, helping maintain trade flows and supply chains, he said.

He added that substantial foreign asset reserves, strategic commodity reserves and Saudi Arabia’s pivotal position in global energy markets have further enhanced the economy’s ability to absorb external shocks.

He further stressed that the continued expansion of non-oil activities and the broader economy despite global challenges reflects the success of economic policies in building a more resilient, robust and adaptable economy.

International confidence

Abdullah Almeer, assistant professor of economics at King Fahd University of Petroleum and Minerals, told Asharq Al-Awsat that the IMF’s projections reflect international confidence in Saudi Arabia’s ability to overcome geopolitical crises.

He said the Saudi economy continues to deliver a remarkable economic transformation despite the expected slowdown in 2026. A rebound to 5.5 percent growth in 2027 would represent “an excellent recovery” given the impact of the war involving Iran and the geopolitical turmoil that has affected the region.

Almeer underlined the importance of diversified export routes, flexible infrastructure and the Kingdom’s financial strength in enhancing economic resilience. He noted that the Saudi Central Bank’s net foreign assets exceed $488 billion, enough to cover 14 months of imports.

The projected growth depends on the recovery of both oil and non-oil activity, continued strength in consumption, increased domestic and foreign investment, and the continued implementation of Vision 2030 megaprojects, he added.

Strong public finances and investment appeal

Commenting on the IMF’s favorable assessment of Saudi Arabia’s fiscal position, Alghaith said the continued strength of public finances and the decline in the non-oil primary deficit reflect the Kingdom’s success in balancing economic growth with fiscal sustainability.

The non-oil primary deficit fell to 23.3 percent of non-oil GDP in 2025 from 24.5 percent in 2024, strengthening the government’s fiscal position and providing greater fiscal space to continue financing priority development projects, he noted.

Almeer remarked that these indicators would bolster the Saudi capital market by strengthening investor confidence and increasing the appeal of Saudi assets.

Strong growth prospects signal economic stability and resilience, encouraging both domestic and foreign investors to expand their investments, he said. Financial markets also tend to perform better as the economic outlook improves and investors’ appetite for higher-return assets increases.

Debt market and IPOs

Almeer went on to say that the development of the domestic debt market and the flexibility of the initial public offering market are helping attract additional investment inflows.

He noted that the inclusion of Saudi riyal-denominated government sukuk in the JPMorgan and Bloomberg indexes reflects the market’s maturity as well as its greater depth and liquidity.

Saudi Arabia has become one of the largest emerging-market bond issuers, strengthening its position in global capital markets and attracting additional foreign investment, he stressed.

The Saudi stock market also enhanced its investment appeal after raising about $4.2 billion through 40 IPOs on the main and parallel markets in 2025, he said.

Sectors poised to benefit

Almeer expects tourism, entertainment, logistics, manufacturing, technology, artificial intelligence and financial services to be among the sectors that will benefit most from the projected growth over the coming years.

He said the massive investments associated with Vision 2030 projects will support economic diversification and increase the private sector’s contribution.

He highlighted several indicators demonstrating the impact of economic reforms, including inflation remaining around 2 percent, women’s labor-force participation rising to 34.5 percent, and Saudi homeownership reaching 66 percent.



Oil Falls but on Track for 8% Weekly Gain on Supply Concerns; US Diesel Hits Record High

WHITING, INDIANA - SEPTEMBER 08: An aerial view shows the sprawling BP refinery on September 08, 2026 in Whiting, Indiana. (Photo by SCOTT OLSON / GETTY IMAGES NORTH AMERICA / Getty Images via AFP)
WHITING, INDIANA - SEPTEMBER 08: An aerial view shows the sprawling BP refinery on September 08, 2026 in Whiting, Indiana. (Photo by SCOTT OLSON / GETTY IMAGES NORTH AMERICA / Getty Images via AFP)
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Oil Falls but on Track for 8% Weekly Gain on Supply Concerns; US Diesel Hits Record High

WHITING, INDIANA - SEPTEMBER 08: An aerial view shows the sprawling BP refinery on September 08, 2026 in Whiting, Indiana. (Photo by SCOTT OLSON / GETTY IMAGES NORTH AMERICA / Getty Images via AFP)
WHITING, INDIANA - SEPTEMBER 08: An aerial view shows the sprawling BP refinery on September 08, 2026 in Whiting, Indiana. (Photo by SCOTT OLSON / GETTY IMAGES NORTH AMERICA / Getty Images via AFP)

Oil prices fell on Friday but remained on course for a weekly gain of more than 8% while US diesel prices hit a record high as attacks along Middle East shipping routes stoked concerns about prolonged supply disruptions.

Brent crude futures were down $3.45, or 3.21%, to $104.18 a barrel at 1132 GMT.

US West Texas Intermediate crude fell $2.96, or 2.89%, to $99.52 a barrel. Both benchmarks hit their highest levels since mid-May earlier in the session.

The benchmarks reversed early gains after the Financial Times reported that foreign ministers in the Middle East are trying to work out a temporary deal with Iran to manage shipping through the Strait of Hormuz.

Brent and WTI rose more than 6% on Thursday after an escalation in shipping attacks in the region.

"Some headlines of possible new talks in the Middle East are weighing moderately on oil prices today," said UBS energy analyst Giovanni Staunovo. "I keep seeing near-term risks to the upside for oil prices, but we should expect ongoing high price volatility too."

In a further potentially significant development for Riyadh, satellite imagery showed smoke on Thursday in the vicinity of Saudi Arabia's East-West Pipeline, which has become a vital means for the kingdom to divert its crude exports away from Hormuz.

Saudi Arabia's crude supply fell by 2.3 million barrels per day on the month to 6 million bpd in August, the lowest level in more than three decades, the International Energy Agency said on Friday, citing attacks on Saudi energy facilities.

Adding to concerns over regional oil flows, Yemen's Iran-aligned Houthis on Friday reached the island of Perim in the Bab el-Mandeb Strait, four Yemeni government sources told Reuters, potentially tightening their grip on one of the world's vital shipping routes.

Iran said it had attacked 10 ships near the Strait of Hormuz on Wednesday, after the US hit five Iranian oil tankers. Iran's Islamic Revolutionary Guard Corps said it would escalate its response to any further attacks.

Vessel transits at the Strait of Hormuz fell to seven on Thursday from 11 the previous day, preliminary ship-tracking data showed on Friday.

The strait handled about 125 commodity vessels and one-fifth of global daily oil and liquefied natural gas supplies before the Iran war began in late February.

Meanwhile, two European Central Bank policymakers opened the door on Friday to further interest rate increases if a war-fuelled rise in energy prices continues and pushes up other prices in the euro zone.

SUPPLY DISRUPTIONS LIFT FUEL PRICES

Oil supply disruptions due to the Iran war, along with Ukrainian attacks on Russia's refineries, pushed the US national average diesel price past $6 a gallon for the first time on Thursday, according to price tracker GasBuddy.

"Refined products, particularly diesel, are feeling a one-two punch right now," said Tim Waterer, chief market analyst at KCM Trade.

"As long as both the Gulf shipping constraints and Russian refining outages remain in play, diesel and other refined products are likely to show a higher upside tendency than the broader crude market," he added.

Commerzbank raised its year-end Brent crude forecast to $85 a barrel from $75, while increasing its diesel forecast to $1,200 a ton from $950 and its jet fuel forecast to $1,230 a ton from $980.


Gold Gains on Softer Oil; US Inflation Data in Focus

A view of smelted gold bars at a smelting facility in Accra, Ghana, August 22, 2024. REUTERS/Francis Kokoroko/
A view of smelted gold bars at a smelting facility in Accra, Ghana, August 22, 2024. REUTERS/Francis Kokoroko/
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Gold Gains on Softer Oil; US Inflation Data in Focus

A view of smelted gold bars at a smelting facility in Accra, Ghana, August 22, 2024. REUTERS/Francis Kokoroko/
A view of smelted gold bars at a smelting facility in Accra, Ghana, August 22, 2024. REUTERS/Francis Kokoroko/

Gold prices rose on Friday, but were headed for a weekly loss, as oil slipped from multi-month highs and assuaged some inflationary concerns, as investors awaited key US economic data for clues on the Federal Reserve's monetary policy path.

Spot gold rose 0.6% to $4,339.46 per ounce by 1105 GMT. It was down nearly 3% for the week so far.

Prices fell on Thursday after the US Producer Price Index data showed prices increased in line with expectations in August amid a rebound in the cost of energy products.

US gold futures dropped 0.6% to $4,381.30.

The precious metal is benefiting from "softer oil prices on hopes a Monday meeting between GCC ministers and Iran can yield some results regarding the passage of oil through the Strait," said Ole Hansen, head of commodity strategy at Saxo Bank. "In addition, buyers once again emerged ahead of a key support area around $4,300," said Hansen.

Oil prices were set to end the week above $100 a barrel.

Higher oil prices stoke inflation fears and bolster expectations of the Fed raising interest rates. While gold is typically seen as an inflation hedge, higher interest rates diminish the appeal of non-yielding bullion.

Traders are now pricing in a 67% chance of a rate hike at the central bank's policy meeting next week, up from 62% before the data, according to the CME FedWatch Tool. The US consumer price inflation report is due at 1230 GMT.

Elsewhere, gold demand in India was subdued this week as volatile prices discouraged buyers, while investment demand remained strong in top consumer China.

Among other metals, spot silver rose 0.4% to $63.80 per ounce, but was down 3% for the week.

Platinum climbed 0.9% to $1,792.07 and palladium gained 2.4% to $1,312.90. However, both metals were on track for a weekly loss.


France Lowers Growth Forecast, Will Miss Deficit Target

French Minister for Economy, Finance, and Industrial, Energy and Digital Sovereignty Roland Lescure gestures as he speaks during a press conference to update the governments growth and fiscal deficit forecasts for the 2027 budget, at the Bercy Economy and Finance Ministry in Paris, France, September 11, 2026. REUTERS/Stephanie Lecocq
French Minister for Economy, Finance, and Industrial, Energy and Digital Sovereignty Roland Lescure gestures as he speaks during a press conference to update the governments growth and fiscal deficit forecasts for the 2027 budget, at the Bercy Economy and Finance Ministry in Paris, France, September 11, 2026. REUTERS/Stephanie Lecocq
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France Lowers Growth Forecast, Will Miss Deficit Target

French Minister for Economy, Finance, and Industrial, Energy and Digital Sovereignty Roland Lescure gestures as he speaks during a press conference to update the governments growth and fiscal deficit forecasts for the 2027 budget, at the Bercy Economy and Finance Ministry in Paris, France, September 11, 2026. REUTERS/Stephanie Lecocq
French Minister for Economy, Finance, and Industrial, Energy and Digital Sovereignty Roland Lescure gestures as he speaks during a press conference to update the governments growth and fiscal deficit forecasts for the 2027 budget, at the Bercy Economy and Finance Ministry in Paris, France, September 11, 2026. REUTERS/Stephanie Lecocq

France's economy will grow less than expected this year and the government will miss its budget deficit target, Finance Minister Roland Lescure said on Friday.

The downgraded outlook complicates the government's task of getting its 2027 budget passed in the coming months in a deeply divided parliament, where parties have hardened their positions before an April-May two-round presidential election.

Lescure told journalists he was lowering the government's 2026 economic growth forecast to 0.5% from 0.7% previously, but stuck with a ⁠projection of 1.0% ⁠for next year.

"This year has been marked by extreme crises involving four different types of shocks," Lescure told reporters, according to Reuters.

Slower growth will make it more difficult for the government to trim its fiscal budget deficit as planned to 5.0% of economic output this year.

"The ⁠reality is that the budget was built on a 5% assumption. And the reality is that, today, 5% is no longer an option," Lescure said.

The minister did not give a new deficit target.

The economic fallout from the war in the Middle East and summer heatwaves and drought that hit agriculture output have dragged down growth and put the government's fiscal targets out of reach.

"I think it is reasonable to say that economic ⁠uncertainty has ⁠never been greater than it is today," Lescure said. "We are operating under tight budgetary constraints; there is no more fat to trim."

Further complicating the picture, French borrowing rates have surged in recent weeks as investors have identified France as one of the weaker links in a global bond selloff due to its weak public finances and serial slippage on its deficit-reduction plans.

Lescure stressed that France had no difficulties in issuing debt, but acknowledged that it now cost more.