Riyad Capital upgraded its forecast for the Kingdom’s GDP growth in 2026 to 4.4%, marking a 0.2 percentage point increase from its earlier forecast, according to the Saudi Economic Chartbook report for 4Q 2025 (pdf). The investment bank kept its outlook for 2025 unchanged at 4.3%.

More optimistic than most: BMI sees Saudi’s GDP growing 3.8% in 2025 before accelerating to 4.1% in 2026. The IMF upgraded its growth forecast to 4% in 2025 and 2026, while the World Bank has a more dispersed forecast of 2.8% for 2025 and 4.5% in 2026.

Unpacking the drivers: Riyad Capital maintained its non-oil sector expansion rate projection of 4.6% this year, slowing down to 4.3% in 2026. This would mark the sector’s sixth consecutive year of growth above 4%. Oil sector growth was also maintained at 5.3% in 2025, while the forecast for 2026 was upgraded by one percentage point to 6.4%.

Oil production increases expected to halt: Amid an anticipated oil oversupply production for the next year, Opec+ decided to limit oil production hikes during 1Q of 2026 through 2Q. The sector has expanded significantly in 2025, following the accelerated reversal of the 2023 production limit decision, leading to an increase of some 1 mn bbl / d.

Fiscal deficit to widen: Riyad Capital now anticipates that fiscal spending for this year will fall by about 3% instead of its previous forecast of 4%. The upgraded projection will result in a fiscal deficit of 5.2% of GDP, up from 4.3% in the previous forecast. The shortfall will then narrow to 3.5% next year, down from 3.4% in the precious forecast.

  • A policy of fiscal consolidation is widely in the cards, after a period of rapid fiscal expansion saw expenditure rise by a cumulative 32% between 2021 and 2024.

Current account shortfall is expected to widen from 0.5% of GDP in 2024 to 3.5% of GDP this year — a 0.2 percentage point improvement from the bank’s previous forecast — primarily due to “lower oil exports and continued strong import growth.” However, the deficit is expected to gradually narrow to 2.9% in 2026, marking a 0.4 percentage point improvement from its previous estimate, largely underpinned by a rebound in oil exports and greater improvement in travel and tourism revenues.

ICYMI- The country’s non-oil merchandise exports inched down 0.4% to over SAR 57 bn in 3Q 2025. Total non-oil merchandise exports — including re-exports — increased 19.4% y-o-y in the same period, as re-exports inched up 69.6% to hit SAR 38.5 bn.

Inflation is expected to remain restrained, with an annual average of 2.1% this year, before easing to 1.9% in 2026, amid rental inflation declines. This represents a downward shift from previous forecasts, when the firm expected inflation to record 2.3% in 2025, before cooling to 2.2% next year. Annual inflation held steady at 2.2% y-o-y in October, marking a contained inflation environment averaging 2-2.5%.

ALSO- Riyad Capital expects the Saudi Central Bank to cut interest rates by 75 bps in total until the end of 2026, following in the footsteps of the US Federal Reserve.

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