Saudi Arabia’s non-oil economy is projected to make up 57% of the nation’s GDP in 2025, underscoring the steady progress in the Kingdom’s economic diversification efforts, S&P Global Ratings said in its latest report. While the figure is likely to fluctuate with oil price volatility, the broader shift toward a more balanced economic model is helping to reduce the Kingdom’s exposure to external financial and commodity-related volatility.

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S&P Global raised its forecasts for the Kingdom’s GDP growth in 2025 to 3.7% In June — up from a previous forecast of 3.5% a month earlier — reflecting stronger prospects for oil production and prices. The agency highlighted several domestic growth drivers underpinning this outlook, including the Public Investment Fund’s USD 40 bn in annual diversification-led investments, the continued rise in female labor participation and home ownership, and a broader fiscal base following the introduction of VAT in 2018.

Oil demand is expected to grow modestly over 2025-2026, albeit at a slower pace than the 1.1 mn bbl / d recorded last year. The market’s surplus capacity — estimated at 5 mn bbl / d — is likely to widen after Opec+’s decision to unwind 2.2 mn bbl / d of production cuts. S&P Global expects oil prices to soften later this year due to an increase in inventories, with Brent crude averaging around USD 60 per barrel before recovering by about USD 5 per barrel in 2026.

Wider fiscal and external deficits are expected in the coming years, as softer oil revenues coincide with high public spending on infrastructure and development projects. Tthe Kingdom’s net government asset buffers will gradually decline, but remain around 40% of GDP between 2025 and 2028 — a level it views as strong enough to support the sovereign credit profile, the agency said.

The current account deficit is expected to persist at around 2.6% of GDP over the same period, with gross debt and banking system exposure set to increase moderately, reflecting ongoing financial needs tied to Vision 2030.
S&P Global projected In late July the fiscal deficits to average 4.4% of GDP, and the current account deficits to hover around 2.4% of GDP over 2025-2028, largely driven by spending on Vision 2030 projects, major international events, and rising imports for development projects. Gross external financing needs are expected to rise to 85% of current account receipts and usable reserves, up from 69% last year, supported by higher levels of short-term external debt issuance by local banks.

Meanwhile, the banking sector remains resilient, as S&P Global expects banks’ external debt to rise over the next 12-24 months but remain below 10% of total lending. Return on assets is expected to stay steady at 2.3% during the same period, as continued lending growth offsets the expected decline in interest rates. Interest costs for the government are also likely to stay below 5% of total revenues through 2028, given expectations that the US Federal Reserve interest rates will stabilize between 3.0% and 3.25% by 2026.

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