Saudi Arabia sees faster economic growth in 2025 despite wider deficit
Higher oil output, strong non-oil activity lift growth, but deficits and debt are rising
Dubai: Saudi Arabia’s economy is expected to accelerate in 2025, buoyed by higher oil production and resilient non-oil activity, according to Riyad Capital’s latest Saudi Economic Chartbook.
The forecast points to 4.3% GDP growth, a sharp improvement from 2% in 2024, as the Kingdom benefits from an anticipated 5.3% rebound in oil activity alongside a 4.6% expansion in non-oil sectors.
However, the stronger growth outlook is accompanied by a widening fiscal gap. The government deficit is projected to reach 4.3% of GDP in 2025, compared to 2.5% in 2024, as spending commitments and lower oil prices weigh on state finances. In nominal terms, the deficit could expand to SAR197 billion. Public debt is also expected to climb to 31.6% of GDP, up from 25.8% this year.
Oil, trade dynamics
Saudi oil output is forecast to rise to 9.5 million barrels per day in 2025, up from 9 million in 2024, amid expectations of gradual recovery in global demand. Still, oil price assumptions remain soft, with Brent averaging $69 per barrel in 2025, down from $79.9 in 2024.
This weaker pricing environment, coupled with robust import demand, is set to narrow the trade surplus to SAR198 billion (4.3% of GDP), sharply down from SAR339 billion in 2024. The current account balance is forecast to swing deeper into deficit, reaching SAR172 billion or 3.7% of GDP.
Inflation, interest rates, jobs
Inflation is expected to average 2.3% in 2025, slightly higher than this year’s 1.7%, while interest rates are projected to ease as global monetary policy shifts. The 3-month SAIBOR is forecast to decline from 5.54% in 2024 to 4.85% in 2025, with the official repo rate easing to 4.5%.
On the labour front, the outlook continues to improve. Overall unemployment is expected to drop to 2.8%, while Saudi national unemployment is seen at 6.3%, reflecting progress in labour market reforms and private-sector job creation.
Balancing growth, fiscal discipline
The outlook highlights a balancing act for Saudi policymakers. Stronger oil output and sustained non-oil expansion will underpin growth, but rising deficits, higher debt levels, and a weaker external position pose risks to fiscal sustainability.
With Vision 2030 reforms continuing to diversify the economy, the near-term challenge remains ensuring that higher growth does not come at the cost of fiscal discipline.
