Saudi Arabia is shifting toward fiscal consolidation in 2026 as it looks to narrow its budget deficit to 3.3% of GDP (SAR 165 bn). This target would mark a significant retreat from the 5.3% (SAR 245 bn) shortfall estimated for 2025, as the Finance Ministry attempts to stabilize the ship following a year of lower oil revenues and aggressive outlays.

Why this matters: The Kingdom is facing a USD 174.5 bn fixed-income maturity wall through 2030, with the government alone on the hook for USD 106.4 bn. To manage this, the Finance Ministry recently approved a USD 57.9 bn (SAR 217 bn) borrowing plan for 2026 to cover the deficit and repay SAR 52 bn in maturing principal.

The growth outlook: Despite the spending slowdown, the Finance Ministry anticipates GDP growth to reach 4.6%. This is more optimistic than the IMF’s 4% and the World Bank’s 4.3% forecasts, which expect to see lopsided growth fueled primarily by the non-oil economy. The multilateral lenders expect to see non-oil activities leading the charge with the help of record-low unemployment and robust private consumption. Emirates NBD echoes this view, seeing a larger youth demographic supporting private spending in the year ahead. Meanwhile, the oil sector is expected to have a sluggish start as Opec+’s decision to pause production increases throughout 1Q 2026 leaves little room for growth.

However, this transition requires significant capital: The Kingdom could see elevated debt levels in 2026, as debt is expected to amount to SAR 1.62 tn in FY 2026 (32.7% of GDP), up from an estimated SAR 1.46 tn in FY 2025, according to the government’s FY 2026 budget.

Inflation remains the bright spot: Price growth is projected to hold steady at somewhere between 2.0-2.2% in 2026, according to NBK, Finance Ministry, and World Bank forecasts. A cooling housing market — aided by the rent freeze in Riyadh — will help offset rising global commodity costs, according to a research note from NBK.

The GCC at large-

While the region as a whole is set to register 4.4% growth (up from 4.0% last year), the UAE and Qatar are emerging as the fiscal outliers, Oxford Economics has said. With Brent projected to average at USD 60 / bbl, national budgets will be under strain for some countries, such as Saudi Arabia, which is expected to face a deficit of approximately 5.0% of GDP.

The hydrocarbon hedge: Regional oil GDP is expected to hit 6.5% growth — the fastest pace since 2022 — buoyed by Qatar’s North Field expansion and a shift by Opec toward prioritizing market share, according to a separate research note from Emirates NBD.

Non-oil base effects: Aggregate non-oil growth across the GCC is actually expected to slow slightly to 4.4% (from 4.8% in 2025) as the “post-covid” momentum finally normalizes.

GCC inflation is anticipated to soften to 1.8% from an estimated 1.9% in 2025, driven by cooling housing costs, lower global oil prices, and a weakening USD, Emirates NBD says.

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