Forecasters agree Saudi dodged the export squeeze, they split on whether spending eats the gains

Deficit forecasts for the Kingdom split on spending, not revenue. By rerouting 60-70% of its oil exports through the East-West pipeline, Saudi Arabia sidestepped the export chokehold that hit Gulf neighbors with no way around Hormuz. Where the deficit lands from here turns on how much of that revenue cushion gets absorbed by capital and defense spending, and the forecasters don't agree on that call.

The split is stark. Fitch Solutions’ BMI expects the fiscal deficit to widen to 5.9% of GDP this year as higher capital spending eats the revenue gains. Moody's reads it the other way. In its July outlook (pdf) it named Saudi Arabia and Abu Dhabi the only two Gulf exporters whose fiscal balance improves through the conflict, on the view that higher oil prices “more than offset lower production volumes.” Both agree the revenue position held. They diverge on whether spending swallows the benefit.

S&P sits closer to Moody's on the mechanism. Hydrocarbon revenues aren't what's moving the regional picture, Ralf Wiegert, head of MENA economics at S&P Global Market Intelligence, tells EnterpriseAM, since expected changes in oil prices and production volumes “are likely to offset one another.” What pushed Gulf deficits wider, on his read, was the emergency spending that inflated public expenditure across the region through 1H 2026. As that unwinds, balances recover.

Where we sit regionally: Saudi lands mid-pack among Gulf exporters — wider than Qatar (out from 0.9% to 4.5% after strikes on its LNG plants) but inside Iraq (5.1% to 6.2%), and well clear of Kuwait, the GCC's widest at anywhere from 18.9% to 25.5% of GDP depending on which BMI assessment you read. The four countries Moody's flags as most exposed — Bahrain, Qatar, Kuwait, and Iraq — have no way around the Strait, while Oman, the other reroute winner, flips to a 2.1% surplus.

Zooming out

The regional deficit widens before it recovers. BMI expects the Gulf's aggregate deficit to reach 6.2% of GDP this year before narrowing to 4.3% in 2027 as revenues recover, having raised its 2026 estimate from 5.7% after cutting its Brent assumption to USD 84 a barrel from USD 88. S&P is more optimistic, seeing the ratio narrow to 2.0% in 2027 from 3.4% in 2026.

The swing factor is the conflict, not crude. S&P's baseline assumes the Gulf conflict eases enough over 12-18 months, short of full resolution, for shipping to resume through Hormuz and Bab Al-Mandab, unwinding the emergency spending that drove up public expenditure through 1H 2026. Moody's frames the upside the same way — a return to a stable outlook rests on durable de-escalation, a sustained Hormuz reopening, and a faster-than-expected recovery in trade, production, tourism, and investor confidence.

But an improving balance isn't an all-clear. Moody's calls the crisis a test of the Gulf's diversification model, warning that prolonged security concerns could dull the region's pull on capital, talent, and tourism, pressuring non-oil growth long after the deficit figures recover.