Real GDP growth is forecast to accelerate from 4% this year to 4.5% in 2026, backed by robust growth in the non-oil sector thanks to the Kingdom’s diversification efforts, Moody’s said in its periodic review seen by EnterpriseAM. The global rating agency attributed its stable economic outlook for the Kingdom to this ongoing economic diversification, which is reducing the country’s dependence on hydrocarbons in the long term.

Showing resilience: Non-oil growth is driven by mega-projects, strong private consumption, and lower unemployment. With less supportive oil prices, the government is utilizing a counter-cyclical fiscal policy to sustain its economic transformation, Moody’s said.

The fiscal deficit is projected to narrow to 3.5-4% of GDP over 2026-2027, from an estimated 5% this year, as oil prices are projected to decline from an average of USD 69 per barrel in 2025 to USD 60 per barrel in the next two years.

In line with projections: Moody’s projection comes in line with NBK’s forecasts of a fiscal deficit of 4% in 2026 from an expected 5% in 2025. Riyad Capital also sees fiscal deficit narrowing to 3.5% of GDP next year from a 5.2% forecast for this year.

The credit rating agency projects a sustained increase in Saudi’s government debt, climbing to an estimated 37% of GDP by the end of 2029 from 21% of GDP in late 2022 and 26% at the end of 2024.

The Kingdom’s credit worthiness breakdown: Saudi’s rating at “Aa3” is supported by the country’s large economy and diversification efforts, high incomes, a competitive advantage in the global oil market and strong government budget.

  • BUT- Oil market price volatility and the transition from carbon for energy still pose some risks.

A higher rating is contingent upon and reducing economic and fiscal reliance on oil, while crowding in the private sector and increasing non-oil sector developments at a faster rate than forecasted.

Risks still abound: Along with the risk of heightened geopolitical tensions, negative consequences would also emerge “if the government materially changed its prudent fiscal policy stance, such as by significantly and persistently increasing its non-hydrocarbon primary deficit that would be difficult to unwind during periods of low oil prices, or if oil prices were to decline sharply for a prolonged period compared to our baseline assumptions,” the report states.

Tags: