Saudi Arabia’s Economic Ambitions Face Fiscal Risks

Fitch Ratings has warned that Saudi Arabia’s efforts to improve its national finances (fiscal consolidation) are at risk. The main challenges are lower oil prices and the significant spending commitments required by the nation’s massive Vision 2030 economic transformation plan.

Spending and Deficit Concerns

• Vision 2030, spearheaded by the Public Investment Fund (PIF), aims to diversify the economy away from oil, which requires hundreds of billions in investments for mega-projects like NEOM.

• This heavy spending, combined with weaker oil revenue, has led to a sharper-than-expected widening of the fiscal deficit.

• Saudi Arabia now predicts its 2025 fiscal shortfall will be 5.3% of Gross Domestic Product (GDP), almost double the initial 2.3% projection. The deficit is then expected to narrow to 3.3% in 2026.

• Fitch noted that the worsening 2025 outlook was primarily due to lower oil income and overspending.

The Path Forward

Following the release of its 2026 pre-budget statement, the Saudi government has signaled a move toward tighter fiscal discipline.

• The government forecasts that revenues will rise 5.1% and spending will fall 1.7% in 2026 compared to 2025.

• Fitch believes that any fiscal improvement will come from stable oil revenues, a rise in non-oil income (which has been strong), and modest reductions in both running and investment expenses.

• The rating agency’s warning underscores that despite its diversification efforts, Saudi Arabia remains vulnerable to shifts in the oil market.