Saudi economy defies global headwinds in 2025

Saudi Arabia’s Ministry of Finance released the Kingdom’s 2025 budget performance, offering further evidence of an economy that continues to demonstrate resilience despite a challenging global environment. While lower oil revenues weighed on fiscal outcomes, the results also highlight the growing strength of the non-oil economy and the continued impact of the structural reforms underpinning Saudi Vision 2030.

Total government revenue reached 93.9 percent of the approved budget, declining 6.1 percent from the projected SR1.18 trillion ($315.7 billion), largely due to lower oil income. However, non-oil revenues exceeded budget estimates by 5.3 percent, reflecting continued progress in broadening the Kingdom’s revenue base and reducing reliance on hydrocarbons.

Government expenditure, meanwhile, surpassed the approved allocation of SR1.29 trillion by 8 percent. The increase was driven by sustained investment in Vision 2030 priorities, including giga-projects, strategic sectors, infrastructure development, public services and quality-of-life initiatives. It also reflected the government’s commitment to advancing structural reforms while supporting long-term economic growth.

Consistent with its counter-cyclical fiscal strategy, the government maintained elevated spending to support economic activity while preserving fiscal sustainability. As a result, the fiscal deficit widened to approximately SR277 billion, or 5.8 percent of GDP, compared with the budgeted SR101 billion, or 2.3 percent of GDP.

Public debt rose to SR1.52 trillion by the end of 2025, equivalent to 31.8 percent of GDP, above the budgeted SR1.3 trillion, or 29.9 percent of GDP. Even so, the debt ratio remained comfortably below the government’s 40 percent ceiling, while reserves stood at approximately SR399 billion, underscoring continued fiscal strength.

The broader economy also delivered solid results. Real GDP expanded by 4.6 percent in 2025, driven largely by robust non-oil growth of 5.1 percent, reinforcing the success of Vision 2030 in fostering a more diversified and sustainable economy. Non-oil activities contributed 2.8 percentage points to overall GDP growth, while the Ministry of Finance’s original forecast proved remarkably accurate, matching the final outcome.

The oil sector also returned to growth, expanding 5.7 percent in real terms following the gradual unwinding, beginning in April 2025, of the additional voluntary production cuts agreed under OPEC+ in November 2023. The measured increase in output supported higher production while contributing to stability in global oil markets.

Macroeconomic fundamentals remained strong. Inflation averaged just 2 percent in 2025, only marginally above the budget estimate of 1.9 percent and well below the global average of 4.1 percent reported by the International Monetary Fund. Price stability has remained one of the Kingdom’s notable economic strengths during a period of persistent inflationary pressures across many major economies.

Labor market indicators also continued to improve. According to the General Authority for Statistics, the unemployment rate among Saudi nationals fell to 7 percent, achieving the Vision 2030 target and reflecting stronger economic activity and job creation. Female labor force participation eased slightly to 34.8 percent but remained well above pre-Vision 2030 levels.

Saudi Arabia’s investment appeal also strengthened. Net foreign direct investment inflows climbed to SR122.4 billion in 2025, up 52.9 percent from the previous year, underscoring growing investor confidence in the Kingdom’s reform agenda and long-term economic prospects.

Taken together, these results illustrate an economy that continues to navigate external headwinds with resilience. Although lower oil revenues widened the fiscal deficit and increased public debt, these outcomes primarily reflected a deliberate policy choice to sustain investment in long-term development rather than fiscal deterioration.

At a time when the International Monetary Fund continues to warn that geopolitical tensions, policy uncertainty and slowing global growth are clouding the international outlook, Saudi Arabia has maintained robust non-oil expansion, low inflation, declining unemployment and rising foreign investment. These achievements demonstrate the growing effectiveness of the Kingdom’s structural reforms in strengthening economic resilience, accelerating diversification, expanding private sector participation and laying the foundations for a more competitive and sustainable economy.

• Talat Zaki Hafiz is an economist and financial analyst.

• X:@TalatHafiz