Saudi economy now expected to shrink in 2026 on extended Hormuz disruption timeline, BMI

Fitch Solutions’ BMI now expects the economy to contract 1.3%, reversing an earlier 1.1% growth call, after the Strait of Hormuz disruptions lasted longer than its models assumed.

ICYMI- Saudi real GDP already contracted 4.8% y-o-y in 2Q 2026, according to a Gastat flash estimate, marking the Kingdom’s first annual contraction since 4Q 2023 and its steepest since the pandemic.

The swing comes down to one variable: Hormuz. BMI had expected shipping through the strait to begin normalizing in July. It now sees disruptions lasting until late 3Q. On that timeline, oil production is forecast to fall 12% this year, with a 25% y-o-y drop in 3Q alone, before a partial recovery in 4Q. The non-oil side took a harder hit in 2Q than expected too, prompting BMI to cut non-oil growth to around 1% from 2%, with exports bearing the brunt.

What holds up: BMI is clear that the contraction is concentrated in oil, not spread across the economy. Consumer spending remains resilient on rising real wages and continued job creation. The non-oil sector, now more than half of GDP, kept expanding through 1H. Saudi Arabia is one of just two Gulf states, alongside Oman, still expected to post non-oil growth this year.

A rebound on the way? BMI sees 7.6% growth next year, which would be one of the Kingdom’s strongest years in two decades. Saudi GDP has exceeded 7% only twice since 2006, per IMF data. The projection assumes Hormuz reopens fully, driving a 24.4% rebound in oil output alongside recovering non-oil exports, higher investment, and consumption growth pushing non-oil GDP close to 5%.

Where BMI sits against the field: The IMF is holding its full-year 2026 call at 1.7% growth (2.6% non-oil) and sees a 5.5% rebound in 2027, both contingent on Hormuz normalizing. A Reuters poll last month also trimmed 2026 growth to 1.4%. But with 2Q already 4.8% down, 1H is tracking negative, and those full-year forecasts now rest on a sharp second-half recovery that has not begun.