Saudi Arabia's GDP growth is expected to slow slightly to 4.3% in 2026 from 4.5% this year, according to the latest ICAEW Economic Update Quarterly report prepared by Oxford Economics. The slower pace of growth will largely be a result of Opec+’s decision to halt oil production increases in 1Q 2026. However, that pause is expected to unwind in 2027, which will in turn help GDP growth accelerate again to 4.5% in 2027.

Growth in the Kingdom’s non-oil economy is expected to pick up pace from 4.6% this year to 5% in 2026, and 5.3% in 2027, according to the report. Non-oil exports grew 17% y-o-y during the first eight months of the year, fueled by machinery and electrical equipment exports, with ICAEW seeing more room for growth as the government looks to boost industry.

Oil sector growth is projected at 4.5% in 2026, before slowing down to 4.1% in 2027. Oil production is expected to pick up from the 10 mn bbl / d recorded in September until the end of the year, before the production hikes come to a halt in 1Q 2026 and possibly throughout 2Q as well. ICAEW sees Saudi oil production regaining its peak levels of 11 mn bbl / d by 2Q 2028.

As for our budget deficit, Oxford economics revised up its deficit estimates by 0.4 percentage points to 5.3% of GDP for 2025, with that figure expected to widen further to 5.6% in 2026 due to the pause in oil production hikes and the subdued oil prices expected next year.

How this compares to other forecasts: BMI sees Saudi’s GDP growing 3.8% in 2025 and accelerating to 4.1% in 2026. The IMF revised its forecasts to pencil in 4% growth in 2025 and 2026, while the World Bank has a more dispersed forecast of 2.8% for 2025 and 4.5% in 2026.

The government tells a different story: The Finance Ministry sees Saudi Arabia’s GDP growing 4.6% in 2026 backed by stronger non-oil activities, and the budget deficit narrowing to 3.3% of GDP in 2026 from the 5.3% estimate for 2025.

The kingdom is benefiting from lower borrowing costs as “the near-term expenditure on interest rates will continue to grow, albeit at a slowing rate, as the effective rate on external debt continues to decline,” ICAEW says. Fitch Ratings’ recent affirmation of an A+ credit rating for the Kingdom along with the government’s measures to ease restrictions on foreign investment is anticipated to attract more investments and maintain the lowered borrowing rates, according to ICAEW.

ICAEW sees inflation averaging at 2.2% in 2025, with a slight increase to 2.7% in 2026, as the government took measures to stabilize the household market with the introduction of a five-year rent freeze in Riyadh. The government sees inflation nearing 2.3% in 2025 before easing to 2% in 2026.

THE GCC AT LARGE-

ICAEW revised down its outlook for overall GCC GDP growth in 2026 to 4.4%, down 0.2 percentage points from its previous forecast for the year, while maintaining its 2025 forecast at 4.1%, The downward revision is attributed to the pause in oil production increases at the beginning of next year.

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