Saudi Arabia enters 2027 with a markedly different fiscal outlook, forecasting a strong economic recovery after a contraction linked to lower oil production, while its expanding non-oil economy increasingly cushions the impact of oil-related shocks.
The preliminary budget statement projects real GDP growth of 12.8 percent in 2027, following an expected contraction of 3.6 percent in 2026, alongside a budget deficit estimated at 3.6 percent of GDP.
The government plans to maintain investment spending and diversify growth sources while gradually reducing the deficit in the coming years.
Economists told Asharq Al-Awsat that the figures reflect a gradual shift in growth and revenue sources. Oil remains central to public finances and exports, but the economy now has a broader range of activities capable of generating growth and income.
Saudi Arabia projects expenditure of SAR 1.392 trillion ($371 billion) in its 2027 budget, against revenue of SAR 1.202 trillion ($320.5 billion), leaving an anticipated deficit of SAR 190 billion ($50.5 billion).
Three Revenue Scenarios
The preliminary budget outlines three revenue scenarios for 2027-2029, with annual government spending held at approximately SAR 1.392 trillion.
Under the baseline projection, revenue is estimated at SAR 1.202 trillion, producing a deficit of around SAR 191 billion. The higher-revenue estimate puts receipts at SAR 1.261 trillion and the deficit at SAR 132 billion, while the lower-revenue projection assumes revenue of SAR 1.134 trillion and a shortfall of SAR 259 billion.
The estimates reflect a broad range of possible fiscal outcomes amid uncertainty surrounding oil markets and the global economy. They also illustrate the government’s ability to accommodate revenue fluctuations through changes in the deficit rather than tying expenditure entirely to short-term shifts in revenue.
Spending and Fiscal Sustainability
Abdullah Almeer, assistant professor of economics at King Fahd University of Petroleum and Minerals, said maintaining elevated spending despite the projected deficit reflects a policy of using public finances to support growth and fund structural economic transformation.
He described the anticipated deficit of 3.6 percent of GDP as part of an effort to balance economic stimulus with fiscal sustainability, emphasizing that its implications depend on the nature of the expenditure it finances.
Infrastructure and development investment could strengthen growth and expand non-oil activities, he explained, whereas higher unproductive recurrent spending could increase debt burdens, financing costs and pressure on reserves.
Almeer estimated Saudi public debt at 30-33 percent of GDP, noting the government’s continued use of domestic and international financing instruments, including sukuk and bonds.
Expanding Non-Oil Revenue
Almeer highlighted the growing contribution of non-oil revenue, which covered approximately 17 percent of total expenditure in 2015, compared with 36 percent in 2025.
He attributed the shift to economic expansion, private-sector growth and investment in infrastructure, tourism and digital transformation.
Investments associated with the National Investment Strategy, the expansion of the Public Investment Fund and the Regional Headquarters Program have also stimulated non-oil sectors, he noted, estimating that more than 700 international companies have established regional headquarters in Riyadh.
External Risks
Almeer identified regional and global geopolitical developments as major risks to the 2027 budget, particularly through their effects on oil and commodity markets and shipping.
A global slowdown accompanied by higher energy prices could weaken demand for Saudi oil and non-oil exports, while persistent inflation and elevated interest rates could increase private-sector financing costs.
Higher global commodity, service and shipping costs could also feed into domestic prices. Saudi inflation is projected at 2.1 percent in 2026.
Almeer identified real non-oil GDP growth as the key indicator to monitor in 2027, alongside inflation, non-oil revenue coverage of expenditure, Saudi unemployment, private-sector contributions to GDP and the debt-to-GDP ratio.
Economic Transformation
Financial and Economic adviser Hussein Alattas said the 2027 budget figures demonstrate a focus on sustaining economic growth alongside fiscal sustainability, rather than merely controlling expenditure or reducing the deficit.
He stressed that continued investment in economic transformation projects aims to strengthen the private sector and increase non-oil contributions while maintaining spending levels capable of supporting growth.
Alattas further highlighted the rise in non-oil revenue from approximately SAR 166 billion in 2015 to SAR 505 billion in 2025 as evidence of structural economic change rather than a temporary increase in receipts.
The expansion of private enterprise, tourism, services, industry, technology and investment has broadened the economy’s capacity to generate income, he underlined.
Oil Remains a Pillar
Alattas argued that nearly a decade after the launch of Vision 2030, economic diversification has moved beyond planning and initiatives to produce tangible results in the economy and public finances.
However, reduced sensitivity to oil-price fluctuations does not mean oil has lost its importance. Crude remains a major source of government revenue and exports, leaving public finances exposed to changes in prices and production.
He explained that the difference lies in the expanding non-oil economy and its growing ability to generate income and growth.
The essence of Saudi Arabia’s economic transformation, Alattas concluded, is not abandoning oil but building an economy capable of continuing to grow and expand under varying oil-market conditions.
