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IMF cuts forecasts for this year for the fourth time: The International Monetary Fund (IMF) is projecting real GDP growth in Saudi to come in at a 1.5% clip this year, the international lender said in its Economic Prospects and Policy Challenges for the GCC Countries report (pdf). The latest projection marks the IMF’s fourth downward revision of its growth forecast for Saudi Arabia this year, and most recently projected in July would hit 1.7% growth. The report cites extended oil production cuts as the reason for slower-than-expected overall growth in the GCC.
Growth will pick up in the medium-term: Saudi’s real GDP is now projected to grow 4.6% next year — down slightly from the IMF’s previously forecasted 4.7% growth for 2025 — and 4.4% in 2026, as oil production cuts continue to ease. This is more or less on par with government targets, which penciled in GDP growth of 4.6% for FY 2025 on the back of a pick-up in non-oil activities and private sector participation.
REMEMBER- Real GDP grew 2.8% y-o-y in 3Q, breaking a four-quarter long downward trend, which saw GDP shrink 0.3% y-o-y in 2Q.
Positive outlook for non-oil activity: The IMF sees the Kingdom’s non-oil sector growing by 3.7% in 2024, before picking up to 4.4% in 2025 and 4.3% in 2026.
Hydrocarbon’s legacy isn’t going anywhere yet: The hydrocarbon sector is gearing up for a strong rebound in 2025 and 2026 with a projected 5% and 4.8% GDP growth, respectively, following a contraction of -5% in 2024, before moderating to 2.4% in 2027 as production stabilizes.
Keeping a lid on inflation: Inflation is projected to settle at 1.7% this year, before ticking up to 1.9% in 2025 and 2.0% in 2026. This trajectory aligns with the broader GCC trend. Inflation accelerated to 2% y-o-y in November, a slight uptick on October’s 1.9% reading as the gauge hit its highest level so far this year.
The Kingdom’s current account surplus is projected to narrow to -1.8% of GDP in 2025, down from 0.4% in 2024, reflecting the impact of voluntary oil production cuts and rising investment-related imports, while high hydrocarbon prices and strong non-oil exports will continue to provide a buffer.
THE REGIONAL ANGLE-
GCC economies are also set to benefit from the dual momentum of oil sector recovery and strong non-oil sector growth, according to the report. Real GDP for the region is projected to rebound by 1.4% this year, expanding further to 3.5% in 2025 and 4.2% in 2026. The medium-term outlook remains favorable, with non-oil sector growth underpinned by reform implementation and diversification efforts.
