A recent report by global consulting firm PwC on the 2025 Middle East economic outlook highlighted the region’s sustained growth, primarily driven by a strong non-oil sector.
Fluctuations in the oil market have renewed the focus on fiscal discipline, particularly in Saudi Arabia, which is recalibrating its priorities to balance financial prudence with ambitious investment goals. The Kingdom is emphasizing private sector growth and major infrastructure projects to boost tourism and improve residents’ quality of life.
At the same time, the report noted that Gulf countries are reforming corporate tax systems to align with the Organization for Economic Cooperation and Development’s (OECD) global tax rules on Base Erosion and Profit Shifting. This shift underscores their commitment to diversifying revenue sources. Despite economic headwinds, business leaders remain optimistic about the region’s future prospects.
Richard Boxshall, Partner and Chief Economist at PwC Middle East, stated in an interview with Asharq Al-Awsat that Saudi Arabia is adopting a calculated approach by reprioritizing expenditures and focusing on value-driven investments to balance fiscal discipline with large-scale infrastructure projects.
He noted that although the Saudi government anticipates a $27 billion fiscal deficit in 2025, it remains committed to maximizing economic and social impact through targeted investments in infrastructure, tourism, and technology-driven sectors.
The Kingdom is also accelerating private sector participation and privatization initiatives to share project costs, reduce public spending, and leverage sovereign wealth funds and development funds to finance key projects without excessive reliance on government expenditure. This approach ensures that Vision 2030 investments continue to drive economic transformation while maintaining long-term fiscal sustainability.
Boxshall highlighted Saudi Arabia’s progress under its Vision 2030, with over 5,000 projects worth $5 trillion currently underway. These include Riyadh Metro, which improves urban mobility; Diriyah Gate, which preserves cultural heritage while boosting tourism; and New Murabba, an ambitious real estate project.
The Kingdom is also investing heavily in renewable energy, aiming to cut carbon emissions and develop a sustainable energy mix through projects, such as the Sakaka Solar Plant and the Dumat Al-Jandal Wind Farm.
The report highlighted OPEC+’s decision to extend voluntary oil production cuts until 2026 to stabilize prices amid slowing demand growth, particularly in China. However, global uncertainties, including US energy policies, have contributed to market volatility. PwC estimates that Brent crude prices will average around $70 per barrel in 2025, down from $80 in 2024.
Boxshall noted that Gulf governments are adjusting fiscal policies and expenditures based on oil price forecasts, ensuring financial sustainability while maintaining economic growth plans. Countries in the region are accelerating non-oil investments in sectors, such as logistics, finance, tourism, and technology to diversify their economies.
To broaden revenue sources, Gulf economies are implementing global minimum tax rules under OECD and G20 frameworks, set to take effect in 2025. This move is expected to generate additional tax revenues while enhancing regulatory stability for businesses.
Boxshall explained that ongoing tax reforms in the region create a more predictable and structured tax environment for companies, supporting long-term investments and economic stability. While businesses will need to adapt to new compliance requirements, the overall commercial climate remains attractive, with competitive tax rates, strategic incentives, and economic growth in non-oil sectors.
According to PwC’s CEO survey, business leaders in the Middle East remain highly optimistic about the future, outpacing global counterparts. Ninety percent of CEOs in the Gulf expected revenue growth in 2025, while 77 percent of Saudi CEOs expressed confidence in local economic expansion, compared to 57 percent globally.
Boxshall attributed this optimism to national transformation plans that drive infrastructure, tourism, and technology investments, as well as a strong investment climate in Gulf Cooperation Council countries. He also pointed to business-friendly policies, tax incentives, and economic resilience as factors strengthening the region’s position as a global trade and investment hub.
