Saudi Economic Forecasts for 2025

Saudi economic forecasts have regularly shown that it will perform better in 2025 than in 2024. Most local and international institutes predict that the Saudi economy will expand at a pace of 4.6% to 4.7% in 2025, marking its strongest growth in three years and positioning it as the second-fastest-growing G20 nation.

Implications for Saudi Economic Growth

Due to the change in forecasts on the frequency of interest rate cuts from four to two, Saudi news sources anticipate a lower growth rate of between 4 and 4.5%. This might potentially lower earlier estimates.

With the decrease in oil output, the Saudi GDP shrank by 0.8% in 2023 and is predicted to expand by 0.8% this year after growing by 7.5% in 2022.

The first of the three primary causes of the Saudi economy’s high growth prospects is the diminishing impact of the oil price reductions (similar production levels in both years).

Saudi Arabia has been producing around 9 million barrels per day since the third quarter of 2023. The OPEC+ alliance decided to extend the production cut until the end of 2025, so 2025 production will be the same as 2024 unless Saudi Arabia ends the voluntary cut. In such a scenario, its output would rise once again to more than 10 million barrels per day, which will benefit economic expansion further.

The second reason for the robust expansion of the Saudi economy is the two-fold decrease in interest rates, which encourages businesses to take out loans and develop to take advantage of the cheap interest rates. This eventually leads to economic expansion.

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Key Drivers of Non-Oil Sector Growth

Along with the anticipated boom in several new and promising industries that will likely see rapid growth, including tourism, entertainment, sports, wholesale and retail trade, finance, insurance, construction, and transportation, the non-oil sector, with its various divisions, is also expected to accelerate its growth rate.

This coincides with the nation’s massive initiatives in anticipation of major international events like the World Cup 2034, Expo 2030, and the Gulf Cup 2027, which seem to take place in Saudi Arabia. However, because of the time difference, the impact in 2025 could be smaller than in the years that follow.

Additionally, as part of its economic reform agenda to lessen its reliance on oil, Saudi Arabia has achieved significant progress in diversifying its economy and is now concentrating on the non-oil sector to boost economic development.

The International Monetary Fund and the Saudi Ministry of Finance anticipate 4.6% economic growth, whereas the World Bank, Moody’s, Fitch, and S&P predict 4.7%.

With the help of the non-oil sector, which lessened the impact of the oil industry’s contraction, the Saudi government anticipates that the local economy will increase by 0.8% this year and continue to develop at a rate of over 3.5% yearly until 2027.

Based on the strong performance of economic indicators and the policies and initiatives implemented to promote tourism and attract investments in Saudi Arabia during the first half of this year, the non-oil industry will continue to increase by 3.7%.

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Sustaining Positive Growth Rates

Indicators for the first half of 2024, particularly those of private investment and consumption, support growth projections. It also seems likely that reduced interest rates will boost demand and boost growth.

According to projections from the Ministry of Finance, economic growth will be 0.8% in 2024, 4.6% in 2025, 3.5% in 2026, and 4.7% in 2027.

The Saudi Ministry of Finance’s forecasts are consistent with the International Monetary Fund’s 2025 prediction, which calls for growth of 4.6% in 2025, although they fall short of the Fund’s 1.5% forecast for 2024.

According to the estimations, the non-oil sector’s expansion will help sustain positive growth rates in 2024 and the medium term. The private sector will continue to drive economic expansion and add jobs to the labour market, as well as carry out sectoral and regional strategies and programs to realise Saudi Vision 2030.

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