Saudi Arabia Heads Into 2027 With Strong Recovery, More Diverse Growth Drivers

Saudi Arabia’s financial district (SPA) 
Saudi Arabia’s financial district (SPA) 
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Saudi Arabia Heads Into 2027 With Strong Recovery, More Diverse Growth Drivers

Saudi Arabia’s financial district (SPA) 
Saudi Arabia’s financial district (SPA) 

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.

 

 



China’s January-September Fiscal Revenue up 5.1% y/y

People look at their phones in a touristic area in Beijing, China, 22 October 2026. (EPA)
People look at their phones in a touristic area in Beijing, China, 22 October 2026. (EPA)
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China’s January-September Fiscal Revenue up 5.1% y/y

People look at their phones in a touristic area in Beijing, China, 22 October 2026. (EPA)
People look at their phones in a touristic area in Beijing, China, 22 October 2026. (EPA)

China's fiscal revenue increased 5.1% in the first nine months of 2026 from a year earlier, following a gain of 5.7% in the January-August period, the finance ministry said on Friday.

In the January-September period, fiscal revenue totaled 17.2 trillion yuan ($2.58 trillion), with tax revenue growing 6.1% year-on-year and non-tax ‌revenue expanding ‌1.2%.

Fiscal expenditure was up ‌1.0% ⁠on the year ⁠in the period, slowing from a rise of 1.2% in the first eight months.

China has accelerated local special bond issuance this year and plans to front-load part of its 2027 ⁠quota, finance ministry official Zhao Zeyong ‌told a press ‌conference on Friday.

Net special bond issuance ‌from January to September reached 3.56 trillion ‌yuan, accounting for 81% of the annual quota, and issuance for September was at 633.5 billion yuan, up by 214.8 billion yuan ‌from the same month last year, Zhao said.

Revenue from ⁠government ⁠land sales fell 27.9% on the year for the period from January to September, narrowing from a fall of 28.6% in the first eight months of this year.

The property sector downturn that began in mid-2021 has eroded land-sale revenue, long a crucial funding source for Chinese local governments.


Asian Stocks Mixed Ahead of Weekend as Tech Recovers Early Losses

 A person walks in front of an electronic stock board showing Japan's Nikkei index at a securities firm Thursday, Oct. 22, 2026, in Tokyo. (AP)
A person walks in front of an electronic stock board showing Japan's Nikkei index at a securities firm Thursday, Oct. 22, 2026, in Tokyo. (AP)
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Asian Stocks Mixed Ahead of Weekend as Tech Recovers Early Losses

 A person walks in front of an electronic stock board showing Japan's Nikkei index at a securities firm Thursday, Oct. 22, 2026, in Tokyo. (AP)
A person walks in front of an electronic stock board showing Japan's Nikkei index at a securities firm Thursday, Oct. 22, 2026, in Tokyo. (AP)

Asian equities were mixed Friday as tech firms managed to claw back some early losses on bargain-buying at the end of tough week for the sector, while traditional safe havens benefited from a generally cautious mood.

Since AI-linked companies hit record highs in June, their equity prices have been pummeled by concerns they were overvalued, their huge outlays on infrastructure and hardware might not return a profit and, more recently, their servicing costs were spiraling.

That has combined with an Iran war-fueled surge in oil prices to more than $100 that has ramped up inflation, forced central banks to hike interest rates and sent government borrowing costs to multi-decade highs.

Strong earnings in past quarters have been able to temper many of the concerns, but analysts pointed out that investors are demanding better and better results to justify their backing.

Earnings from Facebook-parent Meta and chip equipment maker Lam Research this week have beaten forecasts but seen their shares dive.

"Even positive news is being ignored," said FOREX.com's Fawad Razaqzada.

"Strong results are no longer enough if the outlook fails to match an already demanding valuation. Investors are becoming much less forgiving."

The rush out of tech has, however, boosted industrial companies overlooked for much of the AI boom, with the Dow rising this week while the Nasdaq and S&P 500 retreated.

The general losses in New York filtered through to Asia in the morning, but some markets staged a comeback as the day progressed.

Seoul -- which was at the forefront of the AI boom and has led recent losses -- shed more than two percent after the open but was up at the close.

Chipmaker and market heavyweight SK hynix -- a major target amid the waves of buying and selling -- ended up more than four percent. However, its US shares fell more than eight percent Thursday after it said it was scrapping plans for an initial public offering for its US subsidiary Solidigm, citing "market conditions and share price trends".

There were also gains in Hong Kong, Shanghai, Sydney, Singapore and Jakarta.

Tokyo's Nikkei 225, which is also heavily weighted to tech, ended in the red, though well off earlier lows. Wellington, Mumbai and Manila were also down. Taipei was closed as Typhoon Champi neared Taiwan.

London, Frankfurt and Paris dropped in the morning.

Safe havens benefited, with the yen rallying against the dollar, helped by strong Japanese inflation data that boosted bets on another interest rate hike.

The currency has struggled against the greenback in recent years owing to the wide interest rate gap between the United States and Japan, as well as worries about the Asian giant's fiscal situation.

US Treasuries were also in demand, with yields falling from two-decade highs.

"Markets are looking for safe havens as the now familiar fears over AI and the tech sector, alongside ever higher oil and energy prices are powering a move back into bonds," said National Australia Bank's Gavin Friend.

"Regardless of the continued climb in oil prices, investors are increasingly looking for safe havens with the recent pullback in US Treasury yields getting a sizeable push," he said, adding that two- and 10-year Treasury yields were at one-month lows.

And Carol Kong at Commonwealth Bank of Australia said the yen could benefit further if the tech trade continued to deteriorate.

Oil prices added to the dour mood on fresh Middle East worries. Brent extended Thursday's spike and headed back towards $115 a barrel for the first time since May, while WTI topped $100.

The latest rally came after Iran threatened to hit US bases in the region if its military continued to escort ships through the Strait of Hormuz.


Gold Heads for Steep Weekly Loss as Oil Prices Fuel Fed Rate Concerns

British gold bars and Sovereign gold coins are displayed at Baird & Co. in Hatton Garden, London (Reuters)
British gold bars and Sovereign gold coins are displayed at Baird & Co. in Hatton Garden, London (Reuters)
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Gold Heads for Steep Weekly Loss as Oil Prices Fuel Fed Rate Concerns

British gold bars and Sovereign gold coins are displayed at Baird & Co. in Hatton Garden, London (Reuters)
British gold bars and Sovereign gold coins are displayed at Baird & Co. in Hatton Garden, London (Reuters)

Gold eased on Friday, headed for its steepest weekly decline in over four months as elevated oil prices bolstered higher-for-longer interest rate expectations, while investors awaited next week's Federal Reserve policy meeting.

Spot gold eased 0.1% to $4,021.04 per ounce by 0554 GMT, paring losses slightly after touching its lowest level since July 20 earlier in the session. The metal has fallen ‌3.6% so far ‌this week, putting it on track for ‌its ⁠worst week since June.

US ⁠gold futures for December delivery dropped 0.6% to $4,035.50.

Speculators are trying to defend the key $4,000 level for gold because a clean break below would signal that the market has stopped pricing rate relief and started pricing sticky inflation, elevated yields, and a stronger dollar, said Monte Safieddine, head of market research at Capital.com.

Oil ⁠prices rose on Friday after Houthi attacks in ‌Saudi Arabia stoked concerns of further ‌disruption to energy supplies from the Middle East.

Elevated energy prices bolster expectations ‌of higher-for-longer interest rates by the Fed, increasing the opportunity cost ‌of holding non-yielding bullion.

"Any further escalation on the geopolitical front risks pushing oil even higher. Higher oil is reviving inflation fears, lifting yields, and delaying Fed easing. That is a difficult cocktail for bullion," ‌Safieddine added.

Focus has turned to the Fed's October 27-28 policy meeting and next week's Personal ⁠Consumption Expenditures ⁠data, a closely watched gauge because it is the central bank's preferred inflation measure for its 2% inflation target.

Traders are largely expecting the central bank to leave interest rates unchanged next week, but expectations for an interest rate hike in December remain at 76%.

Meanwhile, analysts at HSBC cut their average 2026 platinum and palladium price forecasts in a research note on Thursday, citing shifting market fundamentals and investor liquidation.

Among other metals, spot silver slid 0.4% to $54.31 per ounce, platinum rose 0.3% to $1,574.33 and palladium gained 0.3% to $1,056.49.

However, all three metals were headed for weekly declines.