Riyad Capital revised upward its forecast for the Kingdom’s GDP growth this year to 4.3%, marking a notable increase by 0.8 percentage point from its earlier forecast, according to the Saudi Economic Chartbook report for 3Q 2025 (pdf). Meanwhile, the investment firm has kept its 2026 GDP growth outlook unchanged at 4.2% in 2026.

This projection is more upbeat than other projections, including the IMF, which expects the economy to expand by 3.6% this year and by 3.9% next year. Meanwhile, 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.

Unpacking the drivers: Non-oil activities are set to maintain a robust growth path, with Riyad Capital projecting an expansion by 4.6% this year, before slowing to 4.3% in 2026. This would mark six consecutive years of growth above 4.0%.

Oil sector growth upgraded: The firm revised its oil sector growth projections upward, citing the recent Opec+ decision to accelerate the unwinding of voluntary output cuts. The firm now anticipates the sector to expand by 5.3% this year and 5.4% in 2026. This revised outlook is based on the expectation that the country’s crude production will reach 10 mn barrels per day by as early as September.

REFRESHER- Opec+ approved earlier this month an oil production increase of 547k bbl/d for September, concluding a phase of its supply restoration strategy one year ahead of schedule and bringing Saudi Arabia’s quota to 9.75 mn bbl/d.

Saudi fiscal deficit seen shrinking under consolidation plan: The government is expected to adopt a policy of fiscal consolidation after a period of rapid fiscal expansion, during which the expenditure rose by a cumulative 32% between 2021 and 2024. Fiscal spending is anticipated to fall by about 4% this year, followed by a moderate increase of 3% in 2026, the report noted. This is forecast to result in a fiscal deficit of 4.3% of GDP this year, before narrowing to 3.4% next year.

The Kingdom’s current account shortfall is expected to widen to 3.7% of GDP this year, compared with 0.5% in 2024, primarily due to “lower oil exports and continued strong import growth.” However, the deficit is expected to gradually narrow to 3.3% of GDP in 2026, largely underpinned by a rebound in oil exports and greater improvement in travel and tourism revenues.

ICYMI- The country’s non-oil exports rose 5.6% y-o-y in 2Q 2025 to SAR 55.1 bn. Total non-oil exports — including re-exports — were up 17.8% y-o-y at SAR 87.9 bn during the quarter, as re-exports soared 46.2% y-o-y to hit SAR 32.8 bn.

Inflation is expected to remain restrained, with an annual average of 2.3% this year, before easing to 2.2% in 2026, Riyad Capital noted. This represents a downward shift from previous forecasts, when the firm expected inflation to rise to 2.5% in 2025, before cooling to 2.3% next year. Annual inflation cooled to 2.1% y-o-y in July, marking its lowest reading in five months.

ALSO- Riyad Capital expects the Saudi Central Bank to cut interest rates by overall 100 bps in total until the end of 2026, following in the footsteps of the US Federal Reserve.

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