The World Bank cut its forecast for economic growth in the Kingdom to 3.4% this year, according to the bank’s latest Global Economic Prospects report (pdf). The projection is a downward revision of 2.5 percentage points from the World Bank’s previous report in June. However, the bank penciled in growth of 5.4% in 2026, up from its previous forecast of 3.2%.

The bank’s prediction is slightly more optimistic than that of the International Monetary Fund (IMF), which slashed its growth predictions to 3.2% on the back of extended Opec+ production cuts in its most recent World Economic Outlook Update. Meanwhile, credit rating agency Moody’s expects MENA’s economic growth to reach 2.9% in 2025, up from 2.1% in 2024 with hydrocarbon exporters — Saudi Arabia, the UAE, Iraq, Kuwait, and Oman — growing by 3.5%.

REMEMBER- Opec+ decided in December to push back the start date of production increases by three months to April 2025, with the overall production increases slated to be gradually implemented until the end of 2026.

Driving growth in 2026: The World Bank’s more optimistic predictions for 2026 are down to its expectations of “robust activity in the non-oil sector — especially in services — as well as higher oil production and exports,” the report reads.

Geopolitical tensions still pose a risk: Any escalation in ongoing tensions in neighboring countries could represent a considerable challenge to growth in the Kingdom this year, with the bank saying that “prolonged attacks on shipping in the Red Sea could dampen activity” in the Kingdom as well as other neighboring countries, and that escalations to these conflicts could lead to “significant deteriorations in consumer and business sentiment, increased uncertainty, and tighter financial conditions,” collectively slowing investment activity.

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