Saudi Arabia’s economy grew more than anticipated in the first quarter of 2025, according to official estimates, with the impact of lower oil prices proving less severe than initially projected.
Gross domestic product (GDP) rose by 3.4% year-over-year, surpassing the Saudi General Authority for Statistics’ earlier estimate of 2.7% released in May. Monica Malik, chief economist at Abu Dhabi Commercial Bank, attributed the upward revision to a smaller-than-expected decline in oil sector output and stronger performance in the private sector. Oil GDP fell by just 0.5%, improving from the earlier estimated 1.4% contraction.
Meanwhile, non-oil GDP grew by 4.9%, also above the previous forecast of 4.2%.
The economic drag from falling oil prices may have been offset somewhat by a recent uptick in Saudi oil production. However, the kingdom continues to face a growing fiscal deficit. The International Monetary Fund (IMF) estimates that Saudi Arabia requires oil prices above $90 per barrel to balance its budget—well above current prices, which have hovered near $60 per barrel.
Earlier in June, Saudi Arabia—the world’s top oil exporter—cut its oil prices for Asian markets, following a fourth consecutive monthly production increase by OPEC+ (Organization of the Petroleum Exporting Countries and its allies). The group agreed to boost output by another 411,000 barrels per day in July, matching increases made in May and June.
At the same time, Saudi Arabia is heavily investing in its ambitious Vision 2030 initiative, aimed at diversifying the economy beyond oil. This transformation plan includes multibillion-dollar megaprojects and infrastructure developments.
Saudi Finance Minister Mohammed Al-Jadaan told the Financial Times in May that the government would reassess its spending priorities in light of falling oil revenues. Malik noted that fiscal tightening could slow non-oil economic growth, though Emirates NBD’s senior economist Daniel Richards believes robust ongoing project spending will continue to support growth at least through 2026.
Saudi Arabia is also committed to hosting high-profile international events that require extensive investment, such as the 2029 Asian Winter Games—set to include artificial snow and a man-made lake—and the 2034 FIFA World Cup, which will involve the construction of 11 new stadiums and upgrades to existing ones.
The kingdom’s fiscal deficit for 2025 is expected to reach approximately 101 billion riyals ($27 billion).
Click here for more on Finance and Investing
