EFG Hermes sees the Kingdom’s real GDP growing by 4.5% this year, likely driven by a 4.2% increase in the non-oil sector, lead economist Mohamed Abu Basha said in a research note seen by EnterpriseAM. GDP growth is anticipated to slow down to 2.7% in 2026, with 3.7% growth in non-oil activities, before dipping further to 2.6% in 2027 as non-oil activities grow at a 3.6% clip.

By the numbers: This year, nominal GDP is expected to reach USD 1.19 tn. That number is expected to rise to USD 1.23 tn in 2026 and to around USD 1.29 tn in 2027.

Where this stands versus other projections: The IMF has recently raised its forecast for the Kingdom’s GDP growth in 2025 to 3.6%, with growth for 2026 expected to rise to 3.9%. The World Bank maintained in June its growth forecasts for Saudi Arabia at 2.8% in 2025 and 4.5% in 2026, while a recent Reuters poll projects Saudi Arabia to record 3.8% growth this year.

EFG Hermes sees Saudi Arabia’s trade balance recording a surplus of USD 64.7 bn this year, before decreasing to USD 55.9 bn in 2026 and USD 49.9 bn in 2027. Hydrocarbon exports are expected to reach USD 198.1 bn this year, before increasing to USD 200.4 bn in both 2026 and 2027. Meanwhile, hydrocarbon revenues are seen reaching USD 164.1 bn this year, before declining to USD 156.8 bn in 2026 and USD 156.3 bn in 2027.

Meanwhile, non-hydrocarbon exports are projected to increase to USD 100.3 bn this year, before rising further to USD 107.5 bn in 2026 and USD 115.3 bn in 2027.

OTHER KEY MACRO INDICATORS TO WATCH-

#1- Saudi Arabia’s total public debt is expected to close the year at around 30% of GDP, EFG Hermes noted. The country’s total public debt stood at SAR 1.39 tn at the end of the 2Q, with domestic debt amounting to SAR 871.3 bn and external debt reaching SAR 515.1 bn. Gross external government debt is expected to reach 12.0% of GDP this year, before falling to 11.8% next year and 11.4% in 2027.

#2- The overall fiscal deficit is expected to reach SAR 196 bn in 2025, equivalent to 4.1% of GDP, EFG said. Recent GDP revisions boosted nominal GDP by 14%, providing the government room to run larger nominal deficits while keeping the shortfall near its preferred target of 3-4% of GDP. The fiscal deficit for 1H 2025 reached SAR 93 bn, representing 92% of the annual target of SAR 101 bn and indicating a “clear” budget overrun, according to the research note. 1H expenditures also reached 51% of the annual budget, signaling a high probability that total spending will not remain within budget.

#3- Inflation is projected to hit an average of 2.0% in both 2025 and 2026, before easing to an average of 1.8% in 2027, according to EFG. This is more bullish than Capital Economics’ projections of 2.6% y-o-y this year, but comes higher than its forecast of an average of 0.8% y-o-y in 2026. Meanwhile, Riyad Capital sees inflation rising to 2.5% this year, before easing slightly to 2.3% in 2026, up from an inflation reading of 1.7% in 2024. The IMF said in June that inflation in Saudi Arabia will remain around 2.0% this year.

For more about inflation trends in the Kingdom, read our recent coverage here.

#4- Net foreign assets (NFAs) in the banking sector are expected to reach USD 372.1 bn in 2025, before dropping to USD 352.4 bn in 2026 and USD 332.5 bn in 2027, EFG said. NFAs in the Kingdom’s banking sector showed almost no change in June, holding steady at a surplus of around SAR 1.5 tn by the end of the month. The money supply is projected to grow by 12.3% this year, before growth slows down to 11.2% in 2026 and 10.7% in 2027, according to the note.

Tags: