IMF lowers its expectations for the Kingdom’s growth prospects: The International Monetary Fund (IMF) has cut its growth forecast for Saudi Arabia’s GDP growth during 2025 by 0.3 percentage points to 3% and for 2026 by 0.4 percentage points to 3.7%, down from its January estimates, the fund said in its World Economic Outlook report (pdf).

The regional outlook is not quite promising either: The fund sees growth in the MENA region reaching 2.6% in 2025, a downward revision of 0.8 percentage points. Growth is expected to accelerate to 3.4% in 2026, albeit down from previous forecasts at 4.1%.

Slower oil production recovery could be the culprit: The fund observed “a more gradual resumption of oil production” than previously predicted, coupled with “persistent spillovers from conflicts, and slower-than-expected progress on structural reforms,” which the fund cites as its reasons for lowering its growth forecast for the Middle East and Central Asia at large.

REMEMBER- GDP grew 1.3% y-o-y in 2024, exceeding the government’s 0.8% forecast, while 4Q growth hit 4.5% y-o-y GDP, the fastest in two years, supported by oil and non-oil activity. The Finance Ministry expected GDP growth of 4.6% in 2025, 3.5% in 2026, and 4.7% in 2027, fueled by non-oil expansion, job creation, and foreign investment.

Inflation forecasts inched higher: Inflation in Saudi Arabia is set to come in at 2% both in 2025 and in 2026, up from 1.7% in 2024, the report reads. The prediction for this year marks a a slight upwards revision of 0.1 percentage point from the fund’s previous forecast in December.

MEANWHILE- Saudi Arabia’s current account balance is expected to see a deficit of 4% of GDP this year, before reaching 4.3% of GDP in 2026, down from a deficit of 0.5% in 2024. This prediction is lower than the fund’s previous forecast, which saw the current account balance narrowing to -1.8% of GDP in 2025.

Oil prices to see a dramatic drop: The fund expects oil prices to decrease by 15.5% in 2025, bringing the average price per barrel to around USD 66.94. The decline in prices is expected to continue through to 2026 — albeit at a slower pace, with the fund predicting oil prices to drop to USD 62.38 per barrel, down from an average price of USD 79.17 per barrel in 2024.

The drop in oil prices could hit the Kingdom’s budget quite hard: Saudi Arabia’s budget deficit could widen to USD 67 bn (SAR 251.5 bn), or over 6% of GDP, in a scenario where oil prices average USD 62 per barrel in 2025, Goldman Sachs economist Farouk Soussa said earlier this month. The government needed oil at USD 93 a barrel to balance last year’s budget, according to Bloomberg Economics’ Chief Emerging Markets Economist Ziad Daoud.

The fund’s forecasts are mainly driven by a slowdown in global demand, due to US President Donald Trump’s tariffs and the subsequent escalation of the trade war between Washington and Beijing.

** We’ve got a rundown of the outlook on the global economy in today’s Planet Finance, below.

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