Saudi Economy Overcomes Tariff Disruptions, Grows 2.7% in Q1 2025

The Saudi capital, Riyadh (SPA)
The Saudi capital, Riyadh (SPA)
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Saudi Economy Overcomes Tariff Disruptions, Grows 2.7% in Q1 2025

The Saudi capital, Riyadh (SPA)
The Saudi capital, Riyadh (SPA)

Despite heightened global uncertainty stemming from the sweeping tariff policies imposed by US President Donald Trump since April, which have disrupted major economies worldwide, the Saudi economy demonstrated remarkable resilience by achieving real GDP growth of 2.7% in the first quarter of 2025 year-on-year. This growth was primarily driven by a 4.2% increase in non-oil activities.

According to newly released data from the General Authority for Statistics (GASTAT), the growth figures coincide with the agency’s announcement of a comprehensive update to the GDP calculation methodology. The revisions are part of the Kingdom’s broader strategy to enhance economic transparency, improve the quality and reliability of statistical data, and align national economic indicators with global best practices to support developmental goals.

Preliminary estimates from GASTAT show that real GDP grew 2.7% in Q1 2025, compared to a contraction of 0.6% during the same period in 2024, though lower than the 4.4% growth recorded in Q4 2024. The current growth is attributed to the robust performance of non-oil sectors, alongside a 3.2% increase in government activity. Conversely, oil-related sectors declined by 1.4% year-on-year.

Economic Activity and Statistical Revisions

The updated GDP estimates for 2023 revealed a 14.1% increase from previous figures, equating to an added SAR 566 billion (USD 150.9 billion). Following the revision, the total GDP for 2023 now stands at SAR 4.5 trillion (USD 1.2 trillion).

The revised data also showed a significant increase in the contribution of the non-oil economy, now accounting for 53.2% of GDP—up 5.7% from earlier estimates. This is largely due to the expanded economic activity of small and medium-sized enterprises (SMEs).

Several economic sectors witnessed substantial growth, including construction (up 61%), wholesale and retail trade, restaurants and hotels (up 29.8%), and transportation, storage, and communications (up 25.6%), in addition to notable growth across various other sectors.

Quarterly Comparison

On a seasonally adjusted quarterly basis, real GDP grew by 0.9% in Q1 2025 compared to Q4 2024. This was driven by a 4.9% increase in government activity and a 1% rise in non-oil sectors, despite a 1.2% quarterly decline in oil activities.

Experts argue that Saudi Arabia’s ability to adapt to global economic disruptions - especially those triggered by US tariff policies - demonstrates the Kingdom’s resilience and capacity to sustain economic growth even under adverse conditions.

National Industries Drive Export Growth

Dr. Osama Al-Obaidi, advisor and professor of international commercial law, told Asharq Al-Awsat that the non-oil sector’s growth, despite global challenges such as US-China trade tensions and low oil prices, is a testament to the success of Saudi Arabia’s economic policies.

He attributed the significant increase in non-oil exports in Q1 2025 to a surge in chemical exports - particularly plastics, rubber, and related products - alongside a rise in re-exported goods. This growth also stems from the Kingdom’s voluntary oil production cuts in line with OPEC+ commitments, which reduced the share of oil exports in total trade.

“The growth in non-oil exports reflects the effectiveness of economic diversification under Vision 2030,” Al-Obaidi said. He highlighted the impact of large-scale investments in ports, such as King Abdulaziz Port in Dammam and Jeddah Islamic Port, as well as the development of domestic and international airports and logistics infrastructure. Government support for industries like chemicals, food, and pharmaceuticals has also opened new international markets for Saudi products.

Diversification and Business Climate

Economic researcher Fadwa Al-Buardi emphasized that the 2.7% year-on-year and 0.9% quarterly GDP growth rates are highly significant. She said they underscore the Saudi economy’s ability to navigate global challenges while successfully diversifying its income sources and reducing dependence on oil.

Al-Buardi added that these indicators demonstrate the effectiveness of development strategies and structural reforms under Vision 2030, which aim to strengthen the non-oil sector and ensure sustainable growth.

She also noted that improvements in the business environment, along with major development projects, infrastructure investments, and industrial sector expansion, will continue to boost GDP. Al-Buardi believes Saudi Arabia will remain committed to enhancing its investment climate, increasing non-oil exports, and achieving financial stability through a diversified and sustainable economy.

She highlighted that non-oil sector growth is being driven by economic diversification, private sector stimulation, infrastructure development, streamlined investment procedures, and increased investments in industrial, service, and tech sectors. Government initiatives and incentives have further supported entrepreneurship and attracted both domestic and foreign investors.

National Accounts Reform

The comprehensive GDP update reflects GASTAT’s ongoing efforts to provide more comprehensive, modern, and high-quality statistical data that supports decision-makers, policymakers, investors, and researchers at both domestic and international levels.

The authority has recently implemented several improvements in its national accounts statistics, most notably the adoption of a chain-linked volume index methodology to calculate real GDP growth based on previous-year weights and prices - aligned with international accounting standards.

GASTAT began this update project in early 2024 through a series of extensive surveys for 2023, including the comprehensive economic survey, household income and expenditure survey, and agricultural survey. Administrative data sources were also expanded.

Using this data, GASTAT developed more detailed supply and use tables and provided GDP estimates using production, income, and expenditure approaches, covering 134 economic activities, up from 85 previously.



IMF and Arab Monetary Fund Sign MoU to Enhance Cooperation

The MoU was signed by IMF Managing Director Dr. Kristalina Georgieva and AMF Director General Dr. Fahad Alturki - SPA
The MoU was signed by IMF Managing Director Dr. Kristalina Georgieva and AMF Director General Dr. Fahad Alturki - SPA
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IMF and Arab Monetary Fund Sign MoU to Enhance Cooperation

The MoU was signed by IMF Managing Director Dr. Kristalina Georgieva and AMF Director General Dr. Fahad Alturki - SPA
The MoU was signed by IMF Managing Director Dr. Kristalina Georgieva and AMF Director General Dr. Fahad Alturki - SPA

The International Monetary Fund (IMF) and the Arab Monetary Fund (AMF) signed a memorandum of understanding (MoU) on the sidelines of the AlUla Conference on Emerging Market Economies (EME) to enhance cooperation between the two institutions.

The MoU was signed by IMF Managing Director Dr. Kristalina Georgieva and AMF Director General Dr. Fahad Alturki, SPA reported.

The agreement aims to strengthen coordination in economic and financial policy areas, including surveillance and lending activities, data and analytical exchange, capacity building, and the provision of technical assistance, in support of regional financial and economic stability.

Both sides affirmed that the MoU represents an important step toward deepening their strategic partnership and strengthening the regional financial safety net, serving member countries and enhancing their ability to address economic challenges.


Saudi Chambers Federation Announces First Saudi-Kuwaiti Business Council

File photo of the Saudi flag/AAWSAT
File photo of the Saudi flag/AAWSAT
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Saudi Chambers Federation Announces First Saudi-Kuwaiti Business Council

File photo of the Saudi flag/AAWSAT
File photo of the Saudi flag/AAWSAT

The Federation of Saudi Chambers announced the formation of the first joint Saudi-Kuwaiti Business Council for its inaugural term (1447–1451 AH) and the election of Salman bin Hassan Al-Oqayel as its chairman.

Al-Oqayel said the council’s formation marks a pivotal milestone in economic relations between Saudi Arabia and Kuwait, reflecting a practical approach to enabling the business sectors in both countries to capitalize on promising investment opportunities and strengthen bilateral trade and investment partnerships, SPA reported.

He noted that trade between Saudi Arabia and Kuwait reached approximately SAR9.5 billion by the end of November 2025, including SAR8 billion in Saudi exports and SAR1.5 billion in Kuwaiti imports.


Leading Harvard Trade Economist Says Saudi Arabia Holds Key to Success in Fragmented Global Economy

Professor Pol Antràs speaks during a panel discussion at the AlUla Conference for Emerging Market Economies (Asharq Al-Awsat).
Professor Pol Antràs speaks during a panel discussion at the AlUla Conference for Emerging Market Economies (Asharq Al-Awsat).
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Leading Harvard Trade Economist Says Saudi Arabia Holds Key to Success in Fragmented Global Economy

Professor Pol Antràs speaks during a panel discussion at the AlUla Conference for Emerging Market Economies (Asharq Al-Awsat).
Professor Pol Antràs speaks during a panel discussion at the AlUla Conference for Emerging Market Economies (Asharq Al-Awsat).

Harvard University economics professor Pol Antràs said Saudi Arabia represents an exceptional model in the shifting global trade landscape, differing fundamentally from traditional emerging-market frameworks. He also stressed that globalization has not ended but has instead re-formed into what he describes as fragmented integration.

Speaking to Asharq Al-Awsat on the sidelines of the AlUla Conference for Emerging Market Economies, Antràs said Saudi Arabia’s Vision-driven structural reforms position the Kingdom to benefit from the ongoing phase of fragmented integration, adding that the country’s strategic focus on logistics transformation and artificial intelligence constitutes a key engine for sustainable growth that extends beyond the volatility of global crises.

Antràs, the Robert G. Ory Professor of Economics at Harvard University, is one of the leading contemporary theorists of international trade. His research, which reshaped understanding of global value chains, focuses on how firms organize cross-border production and how regulation and technological change influence global trade flows and corporate decision-making.

He said conventional classifications of economies often obscure important structural differences, noting that the term emerging markets groups together countries with widely divergent industrial bases. Economies that depend heavily on manufacturing exports rely critically on market access and trade integration and therefore face stronger competitive pressures from Chinese exports that are increasingly shifting toward alternative markets.

Saudi Arabia, by contrast, exports extensively while facing limited direct competition from China in its primary export commodity, a situation that creates a strategic opportunity. The current environment allows the Kingdom to obtain imports from China at lower cost and access a broader range of goods that previously flowed largely toward the United States market.

Addressing how emerging economies should respond to dumping pressures and rising competition, Antràs said countries should minimize protectionist tendencies and instead position themselves as committed participants in the multilateral trading system, allowing foreign producers to access domestic markets while encouraging domestic firms to expand internationally.

He noted that although Chinese dumping presents concerns for countries with manufacturing sectors that compete directly with Chinese production, the risk is lower for Saudi Arabia because it does not maintain a large manufacturing base that overlaps directly with Chinese exports. Lower-cost imports could benefit Saudi consumers, while targeted policy tools such as credit programs, subsidies, and support for firms seeking to redesign and upgrade business models represent more effective responses than broad protectionist measures.

Globalization has not ended

Antràs said globalization continues but through more complex structures, with trade agreements increasingly negotiated through diverse arrangements rather than relying primarily on multilateral negotiations. Trade deals will continue to be concluded, but they are likely to become more complex, with uncertainty remaining a defining feature of the global trading environment.

Interest rates and artificial intelligence

According to Antràs, high global interest rates, combined with the additional risk premiums faced by emerging markets, are constraining investment, particularly in sectors that require export financing, capital expenditure, and continuous quality upgrading.

However, he noted that elevated interest rates partly reflect expectations of stronger long-term growth driven by artificial intelligence and broader technological transformation.

He also said if those growth expectations materialize, productivity gains could enable small and medium-sized enterprises to forecast demand more accurately and identify previously untapped markets, partially offsetting the negative effects of higher borrowing costs.

Employment concerns and the role of government

The Harvard professor warned that labor markets face a dual challenge stemming from intensified Chinese export competition and accelerating job automation driven by artificial intelligence, developments that could lead to significant disruptions, particularly among younger workers. He said governments must adopt proactive strategies requiring substantial fiscal resources to mitigate near-term labor-market shocks.

According to Antràs, productivity growth remains the central condition for success: if new technologies deliver the anticipated productivity gains, governments will gain the fiscal space needed to compensate affected groups and retrain the workforce, achieving a balance between addressing short-term disruptions and investing in long-term strategic gains.