Saudi Arabia’s economy grew in the first quarter, supported by activity in the non-oil sector as the kingdom advances its efforts to diversify away from hydrocarbons. Real gross domestic product (GDP) increased 2.7 percent year-on-year in the first quarter, according to flash estimates released by the government’s statistical authority on Thursday. The government body has updated and expanded its data collection, resulting in revised nominal and real GDP time series.
“The demand from everybody, when we met with them, there was always they are hungry for more details, more statistics, more data. So the local demand is the main driver for this,” said Fahad al Dossari, President of GASTAT. As part of the revision, the authority indicated it increased the weighting of the non-oil sector to better align with international standards and improve data quality.
Read more | Moody’s: Non-oil sector to maintain strong contribution to Saudi GDP
Non-oil sector and government activities fuel growth
Non-oil activities increased by 4.2 percent in the first quarter, complemented by a 3.2 percent growth in government activities. According to analysts, private sector activity has remained solid, reflecting the ongoing progress with the investment program. They observed a significant quarterly increase in government activity, likely driven by the relatively supported oil price during the first quarter.
Analysts anticipate a pullback in government spending is anticipated from the second quarter, due to the sharply lower oil price, which is expected to dampen government activity for the rest of the year. Additionally, oil activities showed a decrease of 1.4 percent, as mentioned in the statement.
IMF’s 2025 and 2026 GDP growth forecast for Saudi
In April, the International Monetary Fund (IMF) projected that Saudi Arabia’s economy will grow by 3 percent in 2025, revising its previous estimate of 3.3 percent downward. In its World Economic Outlook Report, the IMF also lowered its growth projections for Saudi Arabia’s GDP in 2026 to 3.7 percent, down from an earlier forecast of 4.1 percent. The report indicates that while Saudi Arabia’s real GDP is expected to grow by 3 percent in 2025, it will accelerate to 3.7 percent in 2026.
The IMF anticipates a slowdown in global growth due to policy shifts and rising uncertainty, although global inflation is expected to decline. Nevertheless, the organization has upgraded its growth projections for several other countries.
The rapid escalation of trade tensions and high levels of policy uncertainty are likely to hinder growth. This shift in policies may lead to a sudden tightening of global financial conditions and capital outflows, which could particularly impact emerging markets, as highlighted in the report.
