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Riyad Capital sees Saudi’s GDP growing at a 1.2% clip this year, before accelerating to 4.8% in 2025. The latest figures mark a downwards revision from its 3Q estimates of 1.5% growth for 2024 and 5.6% for 2025, according to its 4Q Economic Chartbook (pdf).
Maintaining momentum: After returning to growth in 3Q 2024 for the first time since 2Q 2023, Saudi’s economic growth is expected to remain on an upwards trajectory into 2025, with expansion in both the oil and non-oil sectors, Riyad Capital says. Non-oil activities are expected to grow 4.8%, following 4.3% projected growth for this year, as state-backed investments continue to push the diversification agenda. Meanwhile, oil sector growth is forecasted at 5.8% in 2025, following a decline of 5% in 2024, though the phasing out of 1 mn bbl / d in voluntary production cuts may extend into 2026, limiting growth.
How Riyad Capital’s 2024 growth estimates compare: Growth projections for 2024 have trended down all year, with the Finance Ministry recently downgrading its 2024 growth forecast to 0.8%, down from the 4.4% the government had penciled in for the year last December. Moody’s put its 2024 growth projections at 1.7% last week, while the World Bank set a 1.6% projection in October, marking a downward revision from initial projections of 4.1% and 2.5%. Meanwhile, the IMF cut back an earlier 4% estimate to 2.7% in January, before slashing it again to 2.6% in April, 1.7% in July, and finally 1.5% in October.
2025 expectations are looking aligned: The Finance Ministry sees Saudi’s GDP growing at 4.6% in 2025, while the World Bank and the IMF pegged next year’s growth at 4.9% and 4.6%, and Moody’s at 4.7%. Analysts are broadly in agreement that a resumption of oil flows due to the phasing out Opec+ production cuts as well as considerable investments in the non-oil economy will drive faster growth next year.
On the fiscal front: Riyad Capital expects the fiscal deficit to come in at 2.9% of GDP for this year and the next on the back of increased government spending.
Inflation is expected to remain tame, with an estimated 1.7% rate for 2024 rising slightly to 2% in 2025.
Penciling in lower interest rates: Riyad Capital expects an additional 125 bps in cuts by the end of 2025, building on the combined 75 bps cuts already implemented by the US Federal Reserve and the Saudi Central Bank (SAMA). The firm also expects SAMA to push down its 3M Saudi Arabian Interbank Offered Rate (Saibor) to 5.15% by the end of the year, and 4.25% by the end of 2025, down from its current 5.4%.
