## 1sauea2026001 ## Source details **Canonical URL:** [1sauea2026001](https://www.imf.org/-/media/files/publications/cr/2026/english/1sauea2026001.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2026/english/1sauea2026001.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2026/english/1sauea2026001.pdf.json) --- ### Macroeconomic outlook and key projections - Real GDP growth: 4.6 (2025), 1.7 (2026), 5.5 (2027). - Non-oil GDP growth: 4.2 (2025), 2.6 (2026), 4.5 (2027). - CPI Inflation (avg, %): 2.0 (2025), 2.2 (2026), 2.1 (2027). - Central government revenue (% GDP): 23.3 (2025), 23.5 (2026), 24.1 (2027). - Central government expenditure (% GDP): 29.1 (2025), 27.2 (2026), 27.1 (2027). - Fiscal balance (% GDP): -5.8 (2025), -3.7 (2026), -3.1 (2027). - Public debt (% GDP): 31.8 (2025), 32.1 (2026), 34.4 (2027). - Non-oil primary balance (% non-oil GDP): -23.3 (2025), -22.2 (2026), -20.9 (2027). - Broad money (% change): 8.4 (2025), 5.2 (2026), 7.6 (2027). - Credit to the private sector (% change): 10.2 (2025), 5.8 (2026), 7.6 (2027). - Current account (% GDP): -2.6 (2025), -0.3 (2026), -0.8 (2027). - FDI (% GDP): 2.6 (2025), 1.5 (2026), 1.5 (2027). - Reserves (months imports): 13.7 (2025), 13.9 (2026), 14.1 (2027). - External debt (% GDP): 37.6 (2025), 38.0 (2026), 40.5 (2027). - REER (% change): -3.9 (2025), -2.9 (2026), ... (2027). - Unemployment rate overall (% total labor force): 3.2 (2025), ... (2026), ... (2027). - Nationals (% total labor force): 7.0 (2025), ... (2026), ... (2027). - Population: 35.3 million (2024). - Main products and exports: Oil and oil products (69%). - Quota: SDR 9,992.6 million (2.10% of total). ### Recent performance, shocks, and baseline assumptions - 2025 outcomes and 2026 early data: - Non-oil GDP expanded by 4.2 percent in 2025; overall GDP growth 4.6 percent in 2025 (up from 2.65 percent in 2024). - Headline inflation fell to 2 percent by end-2025; rent inflation moderated before a five-year rent freeze in Riyadh in September 2025. - Fiscal deficit rose to 5.8 percent of GDP in 2025; outturn exceeded original budget target of 2.1 percent of GDP; about 60 percent of deviation reflected expenditure overruns, including 1.4 percent of GDP one-offs. - SAMA net foreign assets: $437 billion at end-2025 (around 14 months of imports or 176 percent of the IMF’s reserve adequacy metric). - Conflict-related disruptions and rerouting: - Staff assume maritime traffic through Hormuz begins to normalize gradually in July; oil production and exports return to pre-conflict levels by October with Aramco facilities intact and spare capacity available. - Oil output assumption: could average 9.1 mbpd in 2026 compared to 9.5 mbpd in 2025. - Crude and refined product exports could average 7.5 mbpd in 2026 based on rerouted flows and Aramco inventories. - These assumptions imply an oil-revenue windfall in 2026 as higher oil prices more than offset lower volumes. - High-frequency indicators: - PMI returned above 50 in April-June; weekly point-of-sale data recovered; non-oil activity stabilized in April-May after likely contracting in March. ### Risks, scenarios, and sensitivities - Downside risks (listed): - Escalation or prolongation of the conflict (including continued disruptions to shipping through the Strait of Hormuz and potential disruptions at Bab al-Mandab). - Weaker global demand, trade tensions, tighter financial conditions, and sustained decline in oil prices. - Upside risks: - Faster normalization of maritime traffic, higher oil prices or production, stronger implementation of productivity-enhancing reforms. - Staff illustrative downside scenario (Annex III): - Features prolonged closure of the Strait of Hormuz and short-lived disruptions at Bab al-Mandab; results in lower oil exports, weaker non-oil growth, subdued confidence, increased funding pressures, weaker asset quality, and intensified sovereign-bank linkages. - Exposure sensitivities: - Oil sector accounts for about 22 percent of GDP, more than half of fiscal revenues, and about 60 percent of exports. - Staff estimate a USD 10 per barrel increase in the annual average oil price would raise fiscal revenues and exports by around 2.3 and 2.7 percent of GDP, respectively. - A 1 mbpd decrease in annual oil export volumes would lower fiscal revenues and exports by a similar magnitude. ### Fiscal developments, stance, and consolidation options - Short-term and 2026 guidance: - Staff recommend a modest reduction in the non-oil primary deficit in 2026 (staff suggest aiming about 22–22½ percent of non-oil GDP from 23.3 percent in 2025), corresponding to an overall deficit of 3.7 percent of GDP. - Any fiscal response to the shock should be accommodated through spending reprioritization; fiscal support should be temporary, targeted, and transparent. - Under an illustrative downside scenario, staff recommend discretionary fiscal loosening of about 1.6 percent of GDP (2.0 percent of non-oil GDP) in 2026–27, with about three-quarters in 2026, widening the non-oil primary deficit to about 25 percent of non-oil GDP and the overall fiscal deficit to 6.2 percent of GDP in 2026. - Medium-term consolidation: - Staff recommend preparing for ambitious medium-term consolidation as conditions normalize, anchored in non-oil revenue mobilization, expenditure rationalization, and improved public investment management. - Staff propose an additional cumulative adjustment of about 3½ percent of non-oil GDP in the central government balance over 2027–31, aiming for a 15-year convergence to a PIH-based fiscal anchor: a non-oil primary deficit of 6 percent of non-oil GDP in 2041. - Fiscal consolidation menu (potential cumulative yields through 2031): - Revenue measures: - Introducing a property tax: 1.0–1.4 percent of GDP - Broadening the VAT base, including by removing exemptions: 0.5–1.0 percent of GDP - Introducing excises on luxury goods and environmentally harmful items: 0.1 percent of GDP - Reducing existing tax incentives, including in SEZs, and reviewing scope for introducing corporate income tax for Saudi and GCC companies given Zakat: 0.5–1.0 percent of GDP - Tax administration reform: 0.5 percent of GDP - Expenditure measures: - Completing a fuel and energy subsidy reform: 2.3 percent of GDP - Further rationalizing expenditure (delaying low-priority projects): 0.5–1.0 percent of GDP - Total potential yields: 5.4–7.3 percent of GDP (7.1–9.6 percent of non-oil GDP). - VAT compliance gap: - Indicative VAT compliance gap estimated at 30 to 37 percent of potential revenue over 2019–24, equivalent to an average of 2 percent of GDP; staff recommend a deeper Saudi-specific RA‑GAP assessment. ### Monetary, financial sector, and crisis-preparedness recommendations - Exchange rate and monetary policy: - Maintain the peg to the U.S. dollar as the credible monetary anchor; policy rates should continue to move in line with the Federal Reserve. - Liquidity and banking: - Continue prudent liquidity management; SAMA to calibrate operations to keep short-term rates stable around the policy rate. - SAMA introduced a 100‑bp countercyclical capital buffer (CCyB); banks had built up buffers ahead of implementation in May. - If downside credit freeze emerges, SAMA could release capital buffers and introduce borrower-support measures while preserving transparency in asset classification and provisioning. - Financial stability and supervision: - Implement and follow up on FSAP recommendations, strengthen resolution and emergency liquidity assistance frameworks, finalize ELA framework by end‑2026. - Enhance monitoring of FX funding risks, sovereign‑bank linkages, and exposures to large projects; extend monitoring of FX maturity mismatches beyond one year and consider FX‑LCR and FX‑NSFR if FX borrowing rises. - Local-currency debt market: - Announced inclusion of SAR‑denominated government sukuk in the J.P. Morgan GBI‑EM index (from January 2027) and Bloomberg EM Local Currency Government Index (from April 2027) could attract foreign inflows; assess implications for private-sector borrowing costs and bank funding. ### Structural reforms, PIF strategy, and diversification priorities - Sustain Vision 2030 reforms to deepen diversification and expand private sector participation. - Priorities and policy actions: - Business environment: full implementation of 2025 reforms to streamline business registration, regulation, fees, and strengthen corporate transparency. - Capital markets: implement 2025 Investment Law provisions and gradually lift remaining foreign ownership restrictions. - SMEs: shift support from firm creation to scale-up, focus on credit readiness and financial transparency. - Labor market: assess and address skill mismatches; align education and training with market needs. - Governance: strengthen anti-corruption frameworks, transparency, and accountability. - Digitalization and AI: scale up AI adoption and manage dislocation risks. - PIF strategy: - Recalibrated 2026–30 strategy toward more selective capital allocations and greater private-sector crowding-in; staff welcome shift but stress governance, exit criteria, and monitoring to limit fiscal and financial risks. ### External sector assessment and reserves - 2025 external assessment: - External position in 2025 assessed as moderately weaker than warranted by medium-term fundamentals and desirable policies. - Current account: -2.6 percent of GDP in 2025; projected -0.3 percent of GDP in 2026 and -3.0 percent by 2031. - NIIP: 56.6 percent of GDP at end-2025 (down from 62.3 percent in 2024). - Gross external assets and liabilities (2025, % GDP): Gross Assets 126.2; Res. Assets 36.1; Gross Liab. 69.6; Debt Liab. 19.2; External debt 37.6 percent of GDP. - SAMA net foreign assets: 436.6 (USD billion) at end-2025; reserves equivalent to 13 months of imports and 176 percent of the ARA metric. - Policy implications: - Medium-term fiscal consolidation and diversification of non-oil exports recommended to bring current account closer to norm and support the peg. - Maintain transparent, predictable trade policies and narrowly targeted industrial policies that address market failures without creating distortions. ### Household debt, macroprudential measures, and data gaps - Household debt monitoring: - SAMA and GASTAT are expanding household data collection, including mortgage and consumer loan breakdowns; plan to establish household balance sheets. - Macroprudential actions: - A 100 basis points CCyB activated in May 2025 (effective May 2026); SAMA stands ready to release buffers if needed. - DSTI and LTV re-evaluation implementation in progress; SAMA considers tightening premature while credit growth has slowed. - Crisis management: - Draft Banking Control Law and deposit protection frameworks in progress; CMFDIP under construction; ELA framework expected operational before end‑2026. - Key indicators with household implications: - Non-oil revenue to non-oil GDP ratio declined from 14.2 percent in 2024 to 13.5 percent in 2025. - Diesel price increase in January 2026; gasoline caps remain; diesel remains the most subsidized fuel. - CCyB effective from May 2026 helped decelerate bank credit growth. ### AI Strategy (Annex VII): opportunities, exposures, and policy implications - AI in Vision 2030: - National Strategy for Data and AI (launched 2020) led by SDAIA; AI is a priority under PIF’s 2026-30 strategy. - Most national AI targets for 2025 (AI workforce and investment) surpassed interim targets. - Preparedness and exposure: - High AI preparedness relative to MENA and EMs, behind frontier AEs. - Around 45 percent of jobs highly exposed to AI (AE average ~57 percent; EMs in MENAP average 23 percent). - AI exposure among Saudi nationals: about 80 percent highly exposed; among foreign workers: about 30 percent highly exposed. - AI-exposed employment concentrated in non-tradable sectors (~40 percent of employment); AI-intensive sectors account for 6 percent of employment. - Modeled impacts: - AI adoption could raise real GDP growth by 0.1-0.4 percentage points yearly over the next decade given current preparedness and exposure. - Optimistic scenario: annual growth gains up to 0.6 percentage points, lifting GDP by up to 6 percent in a decade. - Constraints and risks: - Talent shortages, limited private-sector depth for long-term AI projects, data governance and regulatory gaps, project execution and fiscal risks, uncertain external demand, and geopolitical risks to physical assets. - Policy priorities for AI: - Strengthen adoption across sectors, scale reskilling and social protection, deepen private-sector participation and risk-sharing, enhance data governance and cross-border frameworks, prioritize projects to manage fiscal and financing risks. ### Key tables and medium-term projections (selected highlights) - Crude oil production (mbpd): 2023: 9.6; 2024: 9.0; 2025: 9.5; 2026: 9.1; 2027: 10.1; 2028: 10.5; 2029: 10.8; 2030: 10.9; 2031: 11.0. - Average oil export price (USD/bbl): 2023: 85.4; 2024: 83.4; 2025: 74.0; 2026: 93.8; 2027: 82.2; 2028: 77.6; 2029: 75.0; 2030: 73.2; 2031: 71.7. - Nominal GDP (SAR billions): 2025: 4,776; 2026: 5,244; 2027: 5,429; 2031: 6,430. - SAMA net foreign assets (USD billion): 2025: 436.6; 2026: 463.9; 2027: 492.3; 2031: 586.3. - Central government gross debt (% GDP): 2025: 31.8; 2026: 32.1; 2027: 34.4; 2031: 43.9. - CPI (avg): 2025: 2.0; 2026: 2.2; 2027: 2.1; 2028–2031: 2.0 (annual). - Unemployment rate (nationals): 2025: 7.0; overall unemployment 2025: 3.2. ### Executive Board assessment and staff conclusions - Directors welcomed Saudi Arabia’s resilience amid the Middle East conflict and disruptions to shipping, trade, and oil exports, citing Vision 2030–anchored policies, ample fiscal and external buffers, and diversified infrastructure. - Directors emphasized heightened uncertainty and downside risks; recommended policy flexibility, safeguarding buffers, updated contingency plans, and that any fiscal response be temporary, targeted, and transparent. - Staff conclude: modest non-oil primary deficit reduction in 2026 appropriate; Saudi Arabia has fiscal space to ease if shock proves more pronounced, but medium-term ambitious consolidation and structural reforms remain necessary to support the peg, external position, and intergenerational saving. *Source: IMF staff report — Saudi Arabia: Staff Report for the 2026 Article IV Consultation (July 6, 2026).* ### 2.6 percent. Activity will continue to be supported by domestic demand, underpinned by stable ### SAUDI ARABIA: STAFF REPORT FOR THE 2026 ARTICLE IV CONSULTATION ### Macroeconomic outlook and key projections - Real GDP growth: 4.6 (2025), 1.7 (2026), 5.5 (2027). - Non-oil GDP growth: 4.2 (2025), 2.6 (2026), 4.5 (2027). - CPI Inflation (avg, %): 2.0 (2025), 2.2 (2026), 2.1 (2027). - Central government revenue (% GDP): 23.3 (2025), 23.5 (2026), 24.1 (2027). - Central government expenditure (% GDP): 29.1 (2025), 27.2 (2026), 27.1 (2027). - Fiscal balance (% GDP): -5.8 (2025), -3.7 (2026), -3.1 (2027). - Public debt (% GDP): 31.8 (2025), 32.1 (2026), 34.4 (2027). - Non-oil primary balance (% non-oil GDP): -23.3 (2025), -22.2 (2026), -20.9 (2027). - Broad money (% change): 8.4 (2025), 5.2 (2026), 7.6 (2027). - Credit to the private sector (% change): 10.2 (2025), 5.8 (2026), 7.6 (2027). - Current account (% GDP): -2.6 (2025), -0.3 (2026), -0.8 (2027). - FDI (% GDP): 2.6 (2025), 1.5 (2026), 1.5 (2027). - Reserves (months imports): 13.7 (2025), 13.9 (2026), 14.1 (2027). - External debt (% GDP): 37.6 (2025), 38.0 (2026), 40.5 (2027). - REER (% change): -3.9 (2025), -2.9 (2026), ... (2027). - Unemployment rate overall (% total labor force): 3.2 (2025), ... (2026), ... (2027). - Nationals (% total labor force): 7.0 (2025), ... (2026), ... (2027). - Population: 35.3 million (2024). - Main products and exports: Oil and oil products (69%). - Quota: SDR 9,992.6 million (2.10% of total). ### Recent developments and drivers - Activity is supported by domestic demand, underpinned by stable employment, robust government spending, and steady execution of capital projects. - Inflation is projected to rise modestly to 2.2 percent (2026), reflecting higher shipping and insurance costs, partly offset by subdued rent inflation and price caps on some fuel and food items. - Higher oil revenues are expected to narrow the current account and fiscal deficits in 2026. - Over the medium term, growth is expected to be supported by buoyant consumption and investment, including government-led projects and major international events, and by sustained structural reforms under Vision 2030. - The outlook hinges critically on the evolution of the conflict in the Middle East: continued disruptions to shipping through the Strait could curtail trade, weaken confidence, and weigh on growth and diversification. - Upside scenarios include faster normalization of maritime traffic, higher oil prices or production, and stronger implementation of productivity-enhancing reforms. ### Executive Board assessment and IMF staff views - Directors welcomed Saudi Arabia’s resilience amid the war in the Middle East and related shipping, trade, and oil export disruptions, attributing resilience to Vision 2030–anchored policies and sound macro fundamentals, including ample fiscal and external buffers and diversified energy and logistics infrastructure (e.g., the East-West pipeline). - Directors commended authorities’ efforts to support trade rerouting and steady reform progress that strengthened institutions and preserved macroeconomic and financial stability. - Directors noted that the outlook remains highly uncertain with downside risks from escalation or prolongation of the conflict, weaker global demand, trade tensions, tighter financial conditions, and a sustained decline in oil prices. - Policy flexibility, safeguarding buffers, and updated contingency plans were emphasized as important to preserve confidence. - Directors agreed that a modest reduction in the non-oil primary deficit in 2026 is appropriate, and any fiscal response to the shock should be accommodated through spending reprioritization; fiscal support, if provided, should be temporary, targeted, and transparent. - Directors considered that Saudi Arabia has fiscal space to ease its stance if the shock proves more pronounced, while noting that medium-term ambitious fiscal consolidation will be needed as conditions normalize. - The peg to the U.S. dollar was affirmed as appropriate. Directors welcomed SAMA’s prudent liquidity management, strong banking capital and liquidity buffers, implementation progress on the 2024 FSAP recommendations (including activation of the countercyclical capital buffer), and advances in crisis preparedness. - Directors encouraged vigilance on FX funding risks, sovereign-bank linkages, exposures to large projects, and enhanced monitoring of credit conditions. ### Key policy recommendations Fiscal policy - Pursue a modest reduction in the non-oil primary deficit in 2026, accommodating any fiscal response through spending reprioritization. - Prepare for ambitious medium-term consolidation as conditions normalize, anchored in non-oil revenue mobilization, expenditure rationalization, and improved public investment management. - Priorities include energy subsidy reform, strengthened fiscal institutions and frameworks, and ensuring adequate savings for future generations. Monetary and financial sector policy - Maintain the currency peg to the U.S. dollar as the credible monetary anchor. - Continue prudent liquidity management and monitoring of banking sector conditions. - Implement and follow up on FSAP recommendations, including the countercyclical capital buffer and strengthening resolution and emergency liquidity assistance frameworks. - Enhance monitoring of FX funding risks, sovereign-bank linkages, and exposures to large projects. Structural reforms - Sustain reform momentum under Vision 2030 to deepen diversification and expand private sector participation. - Priorities: improve the business environment, deepen capital markets, support small- and medium-sized enterprises, align education with market needs, strengthen governance and transparency, and scale up AI adoption. - Recalibrate PIF strategy toward more selective capital allocations and greater private sector role to foster productivity. ### Risks and scenarios - Downside risks: escalation or prolongation of the conflict (including continued disruptions to shipping through the Strait of Hormuz), weaker global demand, trade tensions, tighter financial conditions, sustained decline in oil prices. - Upside risks: faster normalization of maritime traffic, higher oil prices or production, stronger implementation of productivity-enhancing reforms. - The authorities have established a ministerial-level taskforce to monitor economic stress, facilitate trade rerouting, and update contingency plans. *Source: IMF staff report — Saudi Arabia: Staff Report for the 2026 Article IV Consultation (July 6, 2026).* ### 6. Growth was robust before the conflict. Non-oil GDP expanded by 4.2 percent in 2025, ### 1sauea2026001 - 6. Growth was robust before the conflict. Non-oil GDP expanded by 4.2 percent in 2025, ### Pre-conflict growth, drivers, and labor market - Non-oil GDP expanded by 4.2 percent in 2025, driven by private investment and consumption. - Overall GDP growth rose to 4.6 percent in 2025, up from 2.65 percent in 2024. - Momentum carried into early 2026, reflected in strong PMI and business confidence readings. - Labor market: unemployment among Saudi nationals remained at low levels (Text Figure 2). ### Inflation developments - Headline inflation fell to 2 percent by end-2025. - Rent inflation began to moderate before a five-year rent freeze introduced in Riyadh in September 2025. - Core inflation firmed in the second half of 2025. ### Fiscal outturn and public debt - Fiscal deficit rose to 5.8 percent of GDP in 2025, mainly due to lower oil revenue. - The 2025 outturn significantly exceeded the original budget target of 2.1 percent of GDP. - About 60 percent of the deviation from the budget reflected expenditure overruns, partly driven by 1.4 percent of GDP one-offs. - The non-oil primary deficit tightened from 24.5 percent of non-oil GDP in 2024 to 23.3 percent in 2025, primarily owing to a moderation in capital expenditure. - Deficit borrowing and SAR 30 billion (0.6 percent of GDP) in pre-funding for 2026 pushed gross debt to 31.8 percent of GDP. ### External sector and reserves - Current account deficit widened in 2025, driven by higher imports (particularly capital goods) and remittance outflows, partly offset by gains in non-oil exports (primarily petrochemicals and machinery and transport equipment). - SAMA’s net foreign assets reached $437 billion at end-2025, around 14 months of imports or 176 percent of the IMF’s reserve adequacy metric. - Staff assesses Saudi Arabia’s external position in 2025 to be moderately weaker than warranted by medium-term fundamentals and desirable policies (Annex I). ### Capital markets and issuance - Bond issuance exceeded $60 billion in 2025; more than half was accounted for by the government, PIF, and Aramco. - Saudi Arabia became the largest constituent in the JPM EMBI Global Diversified Index, with a 5.1 percent weight. - Equity markets: Tadawul fell by 13 percent in 2025. - IPO market: USD 4.2 billion raised through 40 new listings across the main and parallel markets in 2025. ### Banking sector and credit conditions - Bank credit grew by 11.5 percent in 2025, led by corporate, real estate, and mortgage lending. - Unweighted loan-to-deposit ratio rose to 112 percent. - Foreign liabilities increased to 12.6 percent of total liabilities as banks tapped international markets. - Banking sector buffers: average total capital adequacy ratio of 20.5 percent and Tier 1 ratio of 18.8 percent in 2025. - Non-performing loans declined to 1.0 percent of total loans in 2025. - Liquidity ratios remained well above regulatory minima. ### Exposures to the conflict and mitigating factors (Box 1) - Oil sector: accounts for about 22 percent of GDP, more than half of fiscal revenues, and about 60 percent of exports. - Staff estimate: a USD 10 per barrel increase in the annual average oil price would raise fiscal revenues and exports by around 2.3 and 2.7 percent of GDP, respectively. - Conversely, a 1 mbpd decrease in annual oil export volumes would lower fiscal revenues and exports by a similar magnitude. - East-West pipeline capacity: can transport up to 7 mbpd to Yanbu; about 5 mbpd can be loaded for exports while the rest feeds refineries. - Non-oil exports: 70 percent of petrochemicals depend on shipments through the Strait of Hormuz; rerouting through Red Sea ports is feasible at higher cost and capacity constraints; limited rerouting for liquid petrochemicals. - Tourism: accounts for 62 percent of services exports and nearly 5 percent of GDP; close to half of inbound tourism is religious (Hajj and Umrah), supporting resilience. - Imports: imports account for about 70 percent of domestic food consumption; Saudi Arabia holds sizeable reserves of essential goods and two-thirds of imports already enter through Red Sea ports. - Capital flows: total external liabilities reached 67 percent of GDP in 2025; short-term external debt amounts to $94 billion (about 22 percent of foreign reserves); most foreign investment is long term and strategic. ### Market reaction and oil rerouting after the conflict - Market reaction: sovereign spreads widened briefly—by less than the EMBIG—but returned to pre-war levels; equity markets initially rose then pared gains, broadly in line with oil prices. - Access to capital markets remained strong; most of the government’s 2026 borrowing plan was executed before the conflict, with greater reliance on local markets and private channels thereafter. - Aramco rerouting: East-West pipeline reached 7 mbpd throughput capacity by late March. - Crude loadings at Yanbu averaged nearly 4½ mbpd thereafter; refined products shipments hovered around 0.5-1 mbpd. - Oil production fell below 7 mbpd in April, from 10.5 mbpd in January-February. - Higher Saudi crude export prices produced a significant premium over regional benchmarks and Brent futures. ### Near-term activity and high-frequency indicators - High-frequency indicators suggest non-oil activity stabilized in April-May after likely contracting in March. - Trade data show sharp and uneven disruption in non-oil goods flows with partial rerouting through Red Sea ports. - Industrial production decline in March-April largely reflects lower oil and refined product output. - Weekly point-of-sale data recovered; PMI returned above 50 in April-June; business confidence stabilized after an initial drop in March. ### Baseline outlook and scenario assumptions - Baseline depends on duration of conflict-related disruptions; staff assumes maritime traffic through Hormuz begins to normalize gradually in July. - With Aramco’s facilities intact and spare capacity available, oil production and exports are assumed to return to pre-conflict levels by October. - Oil output assumption: could average 9.1 mbpd in 2026 compared to 9.5 mbpd in 2025. - Based on observed rerouted flows and assumptions about Aramco’s overseas inventories, crude and refined product exports could average 7.5 mbpd in 2026. - Monthly oil prices: January-May based on actual Arab Light deliveries; for June-December 2026 and 2027–31 prices are aligned with the July 2026 WEO update. - These assumptions imply an oil-revenue windfall in 2026, as higher oil prices more than offset lower volumes. - Non-oil activity is assumed to normalize over a similar timeframe, with varying paces across subsectors. *Source: 1sauea2026001 — country authorities and IMF staff calculations.* ### 18. Growth is set to slow this year, with non-oil GDP easing to 2.6 percent. While the conflict is ### 18. Growth is set to slow this year, with non-oil GDP easing to 2.6 percent. While the conflict is ### Growth outlook and inflation - Non-oil GDP is projected to ease to 2.6 percent in the near term. - A recovery in oil and non-oil activity would lift GDP growth to 5.5 percent in 2027. - Medium-term growth would be supported by consumption and investment. - CPI inflation is projected to rise to 2.2 percent. - Higher shipping and insurance costs will add upward pressure on inflation, but: - Pass-through has historically been limited (Text Figure 11). - Domestic fuel and some food prices remain capped. - Rent inflation is expected to remain subdued. ### Local projections and pass-through evidence - Text Figure 11: estimates are reduced-form pass-through using monthly local projections from January 2015 to March 2025; confidence bands are 90 percent intervals based on Newey-West/HC standard errors. - Food-price shock: +10 percentage point increase. - GPR shock: +1 standard deviation increase in the Saudi-specific Caldara-Iacoviello GPR index. ### Key macroeconomic projections (selected indicators; projections shown individually) - Average oil export price (U.S. dollars per barrel): 85.48, 83.47, 74.09, 3.88, 2.27, 7.67, 5.07, 3.27, 1.7 - GDP growth (percent): 0.5, 2.6, 4.6, 1.7, 5.5, 3.9, 3.6, 3.5, 3.6 - Non-oil GDP growth (percent): 5.8, 5.4, 4.2, 2.6, 4.5, 4.0, 4.0, 3.8, 3.7 - Oil GDP growth (percent): -9.0, -4.4, 5.7, -0.8, 8.5, 3.6, 2.6, 2.7, 3.2 - CPI inflation (percent): 2.5, 1.5, 2.0, 2.2, 2.1, 2.0, 2.0, 2.0, 2.0 - Overall fiscal balance (percent of GDP): -1.8, -2.5, -5.8, -3.7, -3.1, -3.4, -3.5, -3.7, -4.0 - Non-oil primary balance (percent of non-oil GDP): -25.4, -24.5, -23.3, -22.2, -20.9, -19.8, -18.9, -18.0, -17.2 - Government debt (percent of GDP): 23.0, 25.9, 31.8, 32.1, 34.4, 36.7, 39.0, 41.4, 43.9 - Current account balance (percent of GDP): 2.1, -1.3, -2.6, -0.3, -0.8, -1.6, -2.0, -2.6, -3.0 - SAMA net foreign assets (USD billion): 417.1, 414.5, 436.6, 463.9, 492.3, 519.2, 537.6, 559.8, 586.3 - SAMA net foreign assets (percent of reserve adequacy metric): 208, 191, 176, 171, 168, 165, 159, 156, 153 - Growth of banks’ claim on private sector (percent): 10.0, 13.4, 10.2, 5.8, 7.6, 6.8, 6.6, 6.2, 6.1 ### Current account and reserves - The current account shifted from a deficit of $8.2 billion in the fourth quarter of 2025 to a surplus of $4.1 billion in the first quarter of 2026. - As disruptions dissipate and imports recover, the current account is projected to return to deficit in 2026, though the annual deficit would be smaller than in 2025. - SAMA’s net foreign reserves are projected to remain comfortable, with a broadly stable reserve adequacy metric. ### Risks and scenarios - Downside risks dominate the outlook; main risk is a protracted escalation of the conflict. - Potential effects: further disruption of shipping routes (including the Red Sea), damage to energy facilities with lasting output losses, and heightened uncertainty. - Staff illustrative downside scenario (Annex III): - Features prolonged closure of the Strait of Hormuz and short-lived disruptions to shipping at Bab al-Mandab. - Results in lower oil exports, weaker non-oil growth, and subdued confidence. - Would increase funding pressures, weaken asset quality, and intensify sovereign-bank linkages, though financial stability risks would remain contained in the scenario. - Residual risks include weaker global demand, further trade disruptions, tighter financial conditions, and lower oil prices. - Upside risks: faster normalization of traffic through Hormuz, higher oil production, and faster implementation of productivity-enhancing reforms. - Conflict-related disruptions could generate outward spillovers via global oil markets, remittance outflows, and Saudi official aid flows to the region. ### Authorities’ views - Authorities report resilience despite disruptions, citing: - Strong macroeconomic fundamentals. - Sustained investment in diversification, energy security, and logistics infrastructure. - Contingency frameworks and government coordination that preserved trade and supply chain continuity. - They underscored rapid rerouting of shipping around the Strait of Hormuz and accommodation of diverted trade across the wider GCC. - Authorities project stronger fiscal and current account balances than staff, reflecting possible faster normalization in oil exports. ### Fiscal developments and policy priorities - Priorities: (i) support the economy short term while delivering medium-term fiscal consolidation; (ii) safeguard financial stability; (iii) sustain Vision 2030 reforms to support private-sector-led growth. A. Fiscal Policy - The fiscal deficit widened sharply in the first quarter, driven almost entirely by higher spending. - Expenditures rose by around 20 percent y-o-y; increase was broad-based across goods and services, subsidies, and capital spending. - Authorities note part of the increase reflects one-offs (e.g., advance payments to the national healthcare supplier). - Staff recommendation for 2026: - A modest reduction in the non-oil primary deficit to about 22–22½ percent of non-oil GDP (vs. 23.3 percent in 2025) would be appropriate. - This would correspond to an overall deficit of 3.7 percent of GDP. - Support measures should be accommodated mainly through spending reprioritization, including wage bill containment and moderation in capital expenditure. - Approving revisions via a supplementary budget and communicating revised borrowing plans would bolster credibility. - Under the illustrative downside scenario: - Staff recommend a discretionary fiscal loosening of about 1.6 percent of GDP (2.0 percent of non-oil GDP) in 2026–27, with about three-quarters in 2026. - This would widen the non-oil primary deficit to about 25 percent of non-oil GDP and raise the overall fiscal deficit to 6.2 percent of GDP in 2026, financed through debt issuance and a drawdown of government deposits. - As conditions normalize, support would be withdrawn and policy would gradually return to consolidation. - Support design principles: - Temporary, targeted, and transparent. - Businesses: priority liquidity support, tax-based cash-flow relief (accelerated VAT refunds, time-bound deferrals), temporary labor-market measures (wage support and contribution relief conditional on job retention). - Households: rely primarily on social transfers to cushion income losses and protect vulnerable groups. ### Authorities’ measures observed - Measures with limited direct budget cost: operational support to exporters and importers via rerouting shipments, easing logistical bottlenecks, temporary storage and demurrage fee relief, streamlined customs procedures, logistics coordination. - NDF-related entities expected to deploy capital to help maintain credit flows via guarantees, risk-sharing facilities, working-capital support, and export-finance solutions. - Insurance Authority prepared contingency plans to contain insurance-related costs. - Some fuel prices remain capped; recent international price increases widened the gap with domestic prices, raising the value of the energy subsidy. ### Medium-term consolidation and reform recommendations - Authorities intend to continue fiscal consolidation over the medium term. - Under the baseline, the non-oil primary deficit is projected to improve by about 5 percentage points of non-oil GDP over 2027–31. - Government debt projected to reach about 44 percent of GDP by 2031; debt assessed as sustainable and overall sovereign stress risk low given large financial assets. - Staff recommend a more ambitious medium-term consolidation: - An additional cumulative adjustment of about 3½ percent of non-oil GDP in the central government balance over 2027–31, assuming a 15-year convergence to a PIH-based fiscal anchor: a non-oil primary deficit of 6 percent of non-oil GDP in 2041. - Anchoring fiscal policy on a non-oil balance path would help reduce procyclicality linked to oil prices. ### Fiscal consolidation menu (Text Table 1: potential cumulative yields through 2031) - Revenue measures: - Introducing a property tax: 1.0–1.4 percent of GDP - Broadening the VAT base, including by removing exemptions: 0.5–1.0 percent of GDP - Introducing excises on luxury goods and environmentally harmful items: 0.1 percent of GDP - Reducing existing tax incentives, including in SEZs, and reviewing scope for introducing corporate income tax for Saudi and GCC companies given Zakat: 0.5–1.0 percent of GDP - Tax administration reform: 0.5 percent of GDP - Expenditure measures: - Completing a fuel and energy subsidy reform: 2.3 percent of GDP - Further rationalizing expenditure (delaying low-priority projects): 0.5–1.0 percent of GDP - Total potential yields: 5.4–7.3 percent of GDP (7.1–9.6 percent of non-oil GDP) ### VAT compliance gap (Box 2) - Staff’s indicative estimates point to the VAT compliance gap ranging from 30 to 37 percent of potential revenue over 2019–24. - Equivalent to an average of 2 percent of GDP. - Estimates should be interpreted with caution due to data limitations (VAT expenditure component not available). - Methodology: reverse method under IMF RA‑GAP using observed VAT C‑efficiency and benchmark adjustments; approximations used for the tax expenditure component based on comparators. - Staff recommend a deeper assessment of the VAT gap as a revenue-enhancing priority, including a Saudi-specific Revenue Administration GAP assessment and a TADAT assessment; ZATCA has continued rollout of e-invoicing and other measures and requested IMF VITARA training. *International Monetary Fund* ### Box 2. Figure 2. VAT Compliance Gap by Region ### Box 2. Figure 2. VAT Compliance Gap by Region ### VAT compliance findings and interpretation - IMF staff present an indicative VAT compliance gap assessment for Saudi Arabia and comparative regional measures (figures referenced in the source). - The report notes that recent analysis suggests the VAT compliance gap in Saudi Arabia is limited and that any remaining policy gap reflects deliberate policy choices. - Staff emphasize that an accurate, country-specific RA‑GAP assessment would provide a more operationally relevant measure of VAT non‑compliance in Saudi Arabia. ### RA‑GAP methodology and analytical advantages - RA‑GAP relies on detailed national accounts and administrative VAT micro‑data to: - construct potential VAT liabilities on a value‑added, sector‑by‑sector basis; - measure actual collections in a way that isolates compliance effects from cash‑management issues such as refund timing. - The RA‑GAP framework enables: - full decomposition of the VAT gap into policy and compliance components; - identification of sectoral drivers of non‑compliance; - clearer assessment of enforcement priorities. ### Fiscal consolidation and fiscal-framework reforms (staff recommendations) - Consolidation should be accompanied by reforms to strengthen the fiscal framework. Staff recommend: - Budget credibility: - (i) strengthening the realism of forecasts and budget costing; - (ii) tightening in‑year monitoring, reporting, and accountability for deviations; - (iii) continuing to require Council of Ministers approval of any spending beyond appropriations through a supplementary budget; - (iv) publishing a year‑end reconciliation of outturns against the original budget and approved supplements. - Medium‑Term Fiscal Framework (MTFF): - Closer integration of the five‑year MTFF with annual budgets and institutionalized annual forecast‑performance reviews. - Reviewing the fiscal rule and considering an expenditure‑based rule supported by stronger compliance mechanisms—e.g., through an independent institution akin to a fiscal council. - Fiscal risk analysis: - Strengthening forecast‑error analysis and improving disclosure of contingent liabilities—including those related to giga projects, debt guarantees, and public‑private partnerships (PPPs). - Consolidated non‑financial public sector (NFPS) analysis: - Using and publishing a broader measure of fiscal operations—covering off‑budget public entities—alongside the budget. - Sovereign asset‑liability management (SALM) framework: - Developing a SALM framework that encompasses government‑related entities to better assess the sovereign balance sheet, including exposures and risks. - Given PIF’s large exposure to the domestic economy, PIF should continue regular risk assessments and stress testing. ### Authorities’ views on VAT and fiscal stance - Authorities noted fiscal planning evolves given uncertainty, particularly contingency‑related expenditures, and are working to accommodate any fiscal response through spending reprioritization. - They reaffirmed commitment to medium‑term fiscal sustainability and consolidation and noted: - recent analysis suggesting the VAT compliance gap is limited and that residual policy gaps reflect deliberate policy choices; - Saudi Arabia’s fiscal position is underpinned by low public debt, substantial government deposits, a well‑established debt management framework, and diversified and reliable market access; - the 2026 borrowing program remains aligned with the Annual Borrowing Plan and continues to be executed smoothly. ### Related macro‑financial context and policy implications (selected figures and recommendations) - Monetary policy and exchange rate: - The currency peg to the U.S. dollar remains appropriate. - Policy rates were cut by 75 basis points in 2025, bringing the repo rate to 4¼ percent. - Liquidity management: - Banks’ excess liquidity, measured by weekly net reverse repo, has risen by about 25 percent since the onset of the conflict. - SAMA should stand ready to provide liquidity through standing facilities and continue to calibrate operations to keep short‑term rates stable around the policy rate. - To improve liquidity forecasting, SAMA is finalizing a data‑sharing agreement with the MoF and reviewing reserve requirements; work is under way to improve repo market functioning. - Financial sector resilience: - SAMA proceeded with the introduction of a 100‑bp countercyclical capital buffer (CCyB), which banks had already built up ahead of implementation in May. - If a downside credit freeze emerges, staff consider SAMA could release capital buffers and introduce borrower‑support measures (temporary loan repayment deferrals and restructuring) while preserving transparency in asset classification and provisioning. - Staff recommend extending monitoring of FX maturity mismatches beyond the one‑year horizon and further enhancing stress testing and metrics on FX funding risks; if FX borrowing picks up, SAMA could consider introducing FX‑LCR and FX‑NSFR requirements. - Local‑currency debt market (LCDM) developments: - Staff estimate market depth remains about 15 percent below the level implied by Saudi Arabia’s fundamentals. - Announced inclusion of SAR‑denominated government sukuk in the J.P. Morgan GBI‑EM index (from January 2027) and the Bloomberg EM Local Currency Government Index (from April 2027) could generate additional foreign inflows. - Staff note a need for full assessment of the impact on private‑sector borrowing costs and bank funding; any adjustment in sovereign pricing at issuance should be gradual and contingent on supportive market conditions. - Crisis preparedness and supervision: - Implementation of key 2024 FSSA recommendations has advanced; an emergency liquidity assistance (ELA) framework is expected to become operational by end‑2026. - Macroprudential toolkit has been strengthened and supervision has become more risk‑based. *Prepared by Patricio Barra Aeloíza (FAD); figures and analysis as presented in the source content.* ### 46. The authorities plan to place renewed emphasis on economic security. ### 1sauea2026001 - 46. The authorities plan to place renewed emphasis on economic security. ### Strategic priorities and infrastructure - The authorities intend to build on strengths in diversified infrastructure and resilient supply chains to reduce dependence on potential chokepoints through policies and investments, including with private sector participation (e.g., PPPs). - Options cited include expanding port capacity, reinforcing transport corridors (including rail), and extending pipeline networks; their cost, delivery mode, and fiscal implications remain yet to be specified. - Deeper intra-GCC integration — in trade, finance, logistics, the energy sector, and supply chains — is highlighted as key to enhancing the region’s ability to absorb shocks. - The authorities underscored value of resilience assets including the East-West Pipeline, western ports, spare oil production capacity, and logistics networks, and view the environment as reinforcing the need to accelerate investments in energy security, supply chains, advanced logistics, and private sector participation (including through PPPs). ### Reforms to deepen diversification and foster private sector development - Staff welcome the new National Privatization Strategy, expected to expand the private sector’s role in the economy. - Remaining impediments to private investment include low productivity, human capital gaps, and access-to-finance constraints; FDI inflows are described as modest and labor market mismatches persist. - Priorities for reform (preserving text terminology and emphasis): - Business environment: ensure full implementation of the 2025 reforms to further streamline business registration, regulation, and fees, and strengthen corporate transparency and accountability; future reforms should improve regulatory predictability, licensing efficiency, and dispute resolution. - Capital markets: the 2025 Investment Law provides equal treatment for domestic and foreign investors, strengthens investor protection, and expands dispute-resolution options; gradually lifting remaining foreign ownership restrictions in equity markets would broaden the investor base and support market deepening. - SMEs and entrepreneurship: shift policy support from firm creation to scale-up, focusing on credit readiness, financial transparency, and supply-chain integration; broaden financing options, strengthen managerial and digital capabilities, and reduce constraints related to skills, export readiness, and the cost of doing business. - Labor markets: 2025 Labor Law amendments enhance market flexibility and promote equal opportunity; priorities include assessing skill mismatches more systematically and aligning education and training with labor market needs. - Governance: strengthen anti-corruption frameworks, transparency, and accountability; staff welcome authorities’ engagement on governance reforms, including Nazaha’s request for Fund training on AML/CFT, conflict of interest, and asset declaration; further progress on an anti-corruption strategy and reducing transnational corruption risks remains key. - Digitalization and AI: authorities expect AI-related investment (including data centers) to remain robust; unlocking productivity gains requires addressing constraints to AI adoption and managing risks, including job displacements. - Trade: medium-term priorities include reducing non-tariff barriers, strengthening digital trade, and deepening intra-GCC integration; trade facilitation efforts are under way (export-rerouting support, guidance to firms, contingency plans for insurance-related cost pressures). ### PIF strategy and industrial policy - Staff welcome the shift toward more selective capital allocation and private-sector crowding-in in the PIF’s 2026-30 strategy; the strategy remains anchored in domestic transformation with international investments complementary. - Conditions for success: PIF remains catalytic and commercially oriented, with strong governance and close monitoring of implications for liquidity, banks, and fiscal risks; increased space for private investors through co-investment, listings, and divestments is expected to improve execution, efficiency, and returns. - Industrial policies and PIF interventions should complement structural reforms and target well-identified market failures, and incorporate exit criteria, claw-back provisions, and sunset clauses to avoid permanent incentives. - SEZs should be periodically reviewed for consistency with domestic policies (e.g., tax expenditures, labor market regulations) and international frameworks (e.g., global taxation and trade rules); preserve investor confidence by distinguishing temporary resilience-building measures from permanent state support. ### Data, statistics, and transparency - Saudi Arabia’s data provision is broadly adequate for surveillance, with sectoral ratings unchanged from last year (Annex VIII). - Staff welcome authorities’ reporting of Coordinated Direct Investment Survey (CDIS) data and encourage further improvements in BOP and IIP coverage and granularity — prerequisites for a subscription to the IMF’s SDDS Plus. - Authorities highlighted ongoing efforts to enhance statistical capacity and data quality, including progress in CDIS reporting and initiatives to improve coverage, granularity, and timeliness of balance of payments and international investment position statistics. ### Authorities’ views (as reported) - Authorities consider it premature to draw conclusions on medium-term implications of the conflict but do not expect it to materially alter Saudi Arabia’s growth trajectory. - They emphasize the economy’s resilience reflects long-term investments in diversification, infrastructure, and strategic resilience under Vision 2030 and reaffirm commitment to Vision 2030’s strategic objective of reducing oil dependence, increasing economic complexity, and moving up global value chains. - They note the PIF’s 2026–30 strategy places greater emphasis on selective capital allocation, economic impact, and crowding in private investment. - They observe the crisis could catalyze deeper GCC integration in infrastructure, energy connectivity, logistics corridors, and regional supply chains, and reiterate ambition to position Saudi Arabia as a leading hub for AI and digital innovation while strengthening governance, human capital, cybersecurity, and risk management. ### Fiscal and macroeconomic outlook and staff appraisal - Recent outcomes and near-term performance: - Growth rose to 4.6 percent in 2025, supported by the unwinding of OPEC+ production cuts and robust domestic demand. - Labor market trends remained favorable, while inflation eased to below 2 percent. - The conflict and near halt in maritime traffic through the Strait of Hormuz disrupted activity, curtailing oil and non-oil exports and weighing on confidence. - Rerouting oil through the East-West pipeline to Red Sea ports limited the drop in oil deliveries; higher oil prices more than offset volume losses, generating an oil revenue windfall. - Outlook and risks: - The outlook is highly uncertain, with risks firmly to the downside; main risk is escalation or prolongation of the conflict, which could further impair shipping routes, damage energy infrastructure, and heighten uncertainty and financial stability risks. - Under the baseline, growth is projected to slow to 1.7 percent this year, with non-oil growth easing to 2.6 percent. - Non-oil activity would continue to be sustained by domestic demand, supported by stable public employment, government spending, and steady execution of capital projects. - Inflation is expected to rise due to higher shipping and insurance costs but remain contained by limited import price pass-through, price caps on some fuel and food items, and subdued rent inflation. - Higher oil export and fiscal revenue would narrow the current account and fiscal deficits in 2026. - Fiscal policy guidance: - Staff consider a modest reduction in the non-oil primary deficit in 2026 appropriate, implying spending reprioritization as the first line of action to accommodate any fiscal response to the conflict. - Should the shock prove more prolonged, Saudi Arabia has the fiscal space to loosen the fiscal stance to cushion the economy; any support to affected businesses and households should be temporary, targeted, and transparent. - As the economy normalizes, an ambitious medium-term consolidation is recommended to ensure adequate savings for future generations, relying on non-oil revenue mobilization and spending rationalization, including completing energy subsidy reform with targeted protection for the vulnerable. - Priorities include developing a broader measure of NFPS operations to enhance fiscal policy formulation and effectiveness, and operationalizing a comprehensive sovereign asset-liability management framework to improve oversight of sovereign balance sheet exposures and risks. ### Monetary and financial sector assessment - The peg to the U.S. dollar provides a monetary anchor and supports financial stability; SAMA’s policy rates should continue to move in line with those of the Federal Reserve, with fiscal and macroprudential policies playing the primary role in managing domestic demand and macroeconomic conditions. - Saudi Arabia’s external position in 2025 is assessed as moderately weaker than warranted by fundamentals and desirable policies; medium-term fiscal consolidation and competitiveness-enhancing reforms will be critical to bring the current account toward its norm and support the peg. - Banking sector resilience and supervision: - Banks have ample capital and liquidity buffers, with stable profitability and a large domestic depositor base. - Staff welcome SAMA’s efforts to step up monitoring of liquidity, credit conditions, and asset quality. - Staff support implementation of the 100 bp CCyB and progress in strengthening the resolution and emergency liquidity assistance frameworks. - Continued oversight of FX funding risks and deeper monitoring of sovereign-bank linkages and bank exposures to large projects remain warranted. ### Concluding staff view - Vision 2030 reforms to promote diversification and private sector-led growth should continue; sustaining momentum with appropriate sequencing will be key to fostering a more productivity-driven economy and moving up the value chain. - The recalibrated PIF 2026–30 strategy — shifting toward more selective capital allocation and greater private-sector crowding-in — is welcome. - The renewed emphasis on resilience is appropriate: further investments in logistics and infrastructure would help reduce dependence on key chokepoints and strengthen confidence, and deeper intra-GCC cooperation and integration — including in logistics, energy networks, and supply chains — would enhance the region’s shared ability to absorb shocks. *Source: IMF staff report excerpt.* ### 63. It is recommended that the next Article IV consultation takes place on the standard ### 1sauea2026001 - 63. It is recommended that the next Article IV consultation takes place on the standard ### Recommendation - It is recommended that the next Article IV consultation takes place on the standard 12-month cycle. ### Real Sector Developments (figures and indicators) - Real Overall Growth: Demand Side Decomposition shown for 2018–2025 (percent). - Crude oil production and exports (Million Barrels per Day) series shown through Apr-2026. - Sectoral Contribution to Non-Oil Real GDP (Percent) shown Q1-2022 to Q1-2026. - Real GDP Contribution to GDP Growth (Percent) shown Q1-2020 to Q1-2026 by Oil, Private Non-Oil, Govt Non-Oil, Discrepancy. - Point-of-sale Transactions and ATM Withdrawals (Bil. SAR) series through May-2026. - Purchasing Managers' Index (SA, 50+= Expansion) series through May-2026; shows PMI New Orders, PMI Total Economy, Emerging Markets, Developed Markets, expansion threshold (50). ### Inflation Developments (figures and indicators) - Contributions to Real Estate Inflation (Y-o-y Percent Change) series from 2022Q1 to 2026Q1 for Residential properties, Commercial properties, Agricultural Properties, Total Real Estate. - Contributions to Inflation (Y-o-y Change in the CPI) series through May-2026: Rent, Core, Food and Beverages, Total CPI. - Inflation and Wholesale Price Index (Y-o-y Percent Change) series through May-2026: Wholesale Price Index, Consumer Price Index, CPI: Food and Beverages. - Food Price Indices (Y-o-y Percent Change) series through May-2026: Saudi Arabia and World (RHS). - Contributions to Inflation by category (Y-o-y Change in the CPI) through May-2026: Other; Insurance and Financial Services; Restaurant and hotels; Transport; Housing, water, electricity & other fuels; Food, beverage and tobacco; Total. (Other includes clothing and footwear, furnishings, household equipment & maintenance, health, communication, recreation, culture, education, miscellaneous.) - IMF staff CPI projections and Consensus Forecast April 2026 (Y-o-y Change in CPI) for 2026–2031: IMF staff and Consensus Forecast (Mean, High, Low) series shown. (Values shown on figure axis: 1.0, 1.5, 2.0, 2.5, 3.0, 3.5, 4.0 for years 2026–2031.) ### Monetary and Financial Sector Developments (figures and indicators) - SAIBOR-SOFR Spreads (3M) and (Overnight) (Percentage Points) series through Jun-26; SAIBOR-SOFR Spreads shown on figure axis -0.5 to 2.0. - Money Supply (M3, yoy) and Currency Outside Banks (USD Billion RHS) series through May-26. - Policy Rates (Average, Percent) series: SAMA Repo Rate and US Fed Funds Rate through May-26 (axis 0–7 percent). - Average Daily Net Repo/Reverse Repo Purchases (Mil. SAR) and Average Daily Purchases series (4-Week Moving Average) shown for dates between 7/1/2022 and 6/27/2026. - Bank Deposits (USD Billion) and Time & Savings to Deposits Ratio (RHS) series through May-26 (components: Other Quasi-Money Deposits, Time & Savings Deposits, Demand Deposits, Total Deposits). - Private Sector Credit and Deposit Growth (Y-o-y Percent Change) series through May-26: Credit Growth, Deposit Growth, Loan-to-Deposit Ratio (RHS). ### Banking and Financial Sector Developments (figures and indicators) - Bank Credit by Maturity (Y-o-y Percent Change) series Q1-2017 to Q1-2026: Total credit, Short-term credit, Medium-term credit, Long-term credit. - Liquidity Ratios (Percent) series 2020Q4–2025Q4: Net stable funding ratio and Liquidity coverage ratio. - Real Estate Loans (Y-o-y Percent Change) series 2010Q1–2026Q1: Corporate Real Estate Loan Growth, Retail Real Estate Loan Growth, Real Estate Loan Growth, Share of Total Lending to Private Sector (RHS). - Contributions to Bank Credit Growth (Y-o-y Percent Change) Mar-23 to May-26: Personal Loans, Real Estate, Electricity/Gas/Water, Financial & Insurance, Other, Total Bank Credits. (Other includes agriculture, mining, manufacturing, construction, trade, transport, accommodation & food, ICT, professional services, administrative services, education, health & social work, and any remaining unclassified activities.) - Loan-to-Deposit Ratio (Ratio, Percent) series May-11 to May-26. - Capital Adequacy Ratio and Profitability (Ratio) series Mar-15 to Mar-26: Regulatory Tier 1 Capital to Risk-Weighted Assets, Regulatory Capital to Risk-Weighted Assets, Return on Assets (RHS). ### External Sector Developments (figures and indicators) - Current and Financial Account Balances (Percent of GDP) series 2015–2025: Current Account Balance, Capital Account, Financial Account, Errors and Omissions, Reserve change. - International Investment Position (USD Billion) series 2015–2025: Assets: FDI Abroad, Assets: Portfolio Investment, Assets: Other Investment, Assets: Reserve Assets; Liab: FDI in Saudi, Liab: Portfolio Investment, Liab: Other Investment; Net IIP. - Trade Balance (Percent of GDP) series 2015–2025: Services (net), Imports, Oil Exports, Non Oil Exports, Trade balance, Current Account Balance. - Balance of Payments (USD Billion) series 2015–2025: FDI, Portfolio investment, Other investment, Errors and omissions, Capital Account, Reserve Assets, Current Account. - Real and Nominal Effective Exchange Rates (Index, 2010=100) series Apr-10 to Apr-26: NEER and REER. - Foreign Reserves and Trade Balance (EOP, USD Billion) series Jan-19 to Apr-26: Foreign Currency Reserves and Trade Balance (RHS). ### Fiscal Developments (figures and indicators) - Overall Fiscal Balance (Percent of GDP) series 2015–2025 (axis -16 to +4 percent). - Central Government Gross Debt (Percent of GDP) series 2015–2025 (axis 0–35 percent). - Non-Oil Primary Balance (Percent of Non-oil GDP) series 2015–2025 (axis -50 to 0 percent). - Government Revenues (SAR billion) series 2015–2025: Revenue, Oil, Non-oil, Tax Revenue (stacked). - Expenses (Percent of Total) distribution 2015–2025: Employee compensation; Use of goods and services; Interest payments; Support (subsidies); Social benefits; Grants; Other expenses. - Current and Capital Spending (Percent of GDP) series 2018–2025: Current spending, Capital Spending, Total. ### Labor Market Developments (figures and indicators) - Unemployment Rates (Percent) series Q4-2016 to Q1-2026: Overall, Saudi Nationals, Non-Saudi. - Unemployment Rate for Saudi Nationals by Age (Percent) Q1-2022 to Q1-2026: 15-24 years, 55+, Overall. - Wage Premium Over Non-Saudi (Percent) by education level: Masters, Bachelors, Overall (RHS). - Labor Force Participation Rates for Saudi Nationals (Percent) series Q1-2021 to Q1-2026: Total, Males, Females. - Private Sector Employment (Millions) and Saudi vs. Non-Nationals (RHS) series Q3-2018 to Q1-2026. - Average Monthly Wages (Riyals) and Gender wage gap (Saudi male vs. female, RHS; Non-Saudi male vs. female, RHS) series Q1-2022 to Q1-2026. ### Selected Economic Indicators, 2023–31 (Table 1 highlights) - Crude oil production (million of barrels per day): 2023: 9.6; 2024: 9.0; 2025: 9.5; 2026: 9.1; 2027: 10.1; 2028: 10.5; 2029: 10.8; 2030: 10.9; 2031: 11.0. - Average oil export price (U.S. dollars per barrel)1: 2023: 85.4; 2024: 83.4; 2025: 74.0; 2026: 93.8; 2027: 82.2; 2028: 77.6; 2029: 75.0; 2030: 73.2; 2031: 71.7. - Nominal GDP (SAR billions): 2023: 4,570; 2024: 4,703; 2025: 4,776; 2026: 5,244; 2027: 5,429; 2028: 5,647; 2029: 5,890; 2030: 6,149; 2031: 6,430. - Nominal GDP (US$ billions): 2023: 1,219; 2024: 1,254; 2025: 1,274; 2026: 1,398; 2027: 1,448; 2028: 1,506; 2029: 1,571; 2030: 1,640; 2031: 1,715. - Real GDP (percent change): 2023: 0.5; 2024: 2.6; 2025: 4.6; 2026: 1.7; 2027: 5.5; 2028: 3.9; 2029: 3.6; 2030: 3.5; 2031: 3.6. - Oil (real growth): 2023: -9.0; 2024: -4.4; 2025: 5.7; 2026: -0.8; 2027: 8.5; 2028: 3.6; 2029: 2.6; 2030: 2.7; 2031: 3.2. - Non-oil (real growth)2: 2023: 5.8; 2024: 5.4; 2025: 4.2; 2026: 2.6; 2027: 4.5; 2028: 4.0; 2029: 4.0; 2030: 3.8; 2031: 3.7. - Consumer price index (avg): 2023: 2.5; 2024: 1.5; 2025: 2.0; 2026: 2.2; 2027: 2.1; 2028: 2.0; 2029: 2.0; 2030: 2.0; 2031: 2.0. - Current account balance (percent of GDP): 2023: 2.1; 2024: -1.3; 2025: -2.6; 2026: -0.3; 2027: -0.8; 2028: -1.6; 2029: -2.0; 2030: -2.6; 2031: -3.0. - Money and quasi-money (M3) growth: 2023: 7.6; 2024: 8.8; 2025: 8.4; 2026: 5.2; 2027: 7.6; 2028: 7.4; 2029: 6.6; 2030: 5.5; 2031: 5.4. - Central government finances (Percent of GDP): Revenue: 2023: 26.5; 2024: 26.8; 2025: 23.3; 2026: 24.8; 2027: 24.1; 2028: 23.5; 2029: 23.1; 2030: 22.5; 2031: 22.0. Expenditure: 2023: 28.3; 2024: 29.2; 2025: 29.1; 2026: 27.2; 2027: 27.1; 2028: 26.9; 2029: 26.6; 2030: 26.3; 2031: 25.9. - Net lending (+) / borrowing (-) (Percent of GDP): 2023: -1.8; 2024: -2.5; 2025: -5.8; 2026: -3.7; 2027: -3.1; 2028: -3.4; 2029: -3.5; 2030: -3.7; 2031: -4.0. - Central government gross debt (Percent of GDP): 2023: 23.0; 2024: 25.9; 2025: 31.8; 2026: 32.1; 2027: 34.4; 2028: 36.7; 2029: 39.0; 2030: 41.4; 2031: 43.9. - SAMA's total net foreign assets (US$ billions) memorandum: 2023: 417.1; 2024: 414.5; 2025: 436.6; 2026: 463.9; 2027: 492.3; 2028: 519.2; 2029: 537.6; 2030: 559.8; 2031: 586.3. - Population (millions): 2024: 35.3 (latest observation noted). - Unemployment rate (nationals): 2024: 7.4; 2025: 7.0 (latest observation noted). - Unemployment rate (overall): 2024: 3.5; 2025: 3.2 (latest observation noted). Notes in Table 1: - 1 Includes refined products. - 2 Takes the sum of non-oil activities GDP, government activities GDP, and net taxes published by the authorities. - 3 Latest observation. ### Budgetary Central Government Operations, 2023–31 (Table 2 highlights) - Revenue (SAR billions): 2023: 1,212; 2024: 1,259; 2025: 1,111; 2026: 1,184; 2027: 1,233; 2028: 1,147; 2029: 1,307; 2030: 1,327; 2031: 1,359. - Oil revenue (SAR billions) series: 2023: 755; 2024: 757; 2025: 607; 2026: 706; 2027: 740; 2028: 729; 2029: 727; 2030: 720; 2031: 713. - Non-oil revenue (SAR billions) series: 2023: 458; 2024: 502; 2025: 505; 2026: 527; 2027: 567; 2028: 598; 2029: 632; 2030: 665; 2031: 700. - Tax revenues (SAR billions): 2023: 320; 2024: 341; 2025: 347; 2026: 359; 2027: 389; 2028: 411; 2029: 435; 2030: 459; 2031: 483. - Expenditure (SAR billions): 2023: 1,293; 2024: 1,375; 2025: 1,388; 2026: 1,285; 2027: 1,428; 2028: 1,313; 2029: 1,473; 2030: 1,519; 2031: 1,566. - Expense (SAR billions): 2023: 1,107; 2024: 1,184; 2025: 1,220; 2026: 1,101; 2027: 1,265; 2028: 1,151; 2029: 1,300; 2030: 1,335; 2031: 1,373. - Net lending (+) / borrowing (-) (SAR billions): 2023: -81; 2024: -116; 2025: -277; 2026: -101; 2027: -195; 2028: -165; 2029: -166; 2030: -192; 2031: -208. - Net lending (+) / borrowing (-) (Percent of GDP): 2023: -1.8; 2024: -2.5; 2025: -5.8; 2026: -3.7; 2027: -3.1; 2028: -3.4; 2029: -3.5; 2030: -3.7; 2031: -4.0. - Financing (SAR billions) and composition shown; memorandum items include central government gross debt (percent of GDP) and deposits. Footnote in Table 2: - 1/ Zakat charity transfers, social welfare payments, and Hafiz Job-seekers allowance. ### Balance of Payments, 2023–31 (Table 3 highlights) - Current account ($ Billion): 2023: 25.9; 2024: -16.3; 2025: -32.7; 2026: -4.0; 2027: -11.7; 2028: -23.8; 2029: -32.2; 2030: -41.9; 2031: -51.5. - Current account (Percent of GDP): 2023: 2.1; 2024: -1.3; 2025: -2.6; 2026: -0.3; 2027: -0.8; 2028: -1.6; 2029: -2.0; 2030: -2.6; 2031: -3.0. - Trade balance ($ Billion): 2023: 130.3; 2024: 92.0; 2025: 81.4; 2026: 114.7; 2027: 101.8; 2028: 87.0; 2029: 77.3; 2030: 65.2; 2031: 54.8. - Exports ($ Billion): 2023: 320.2; 2024: 305.8; 2025: 311.0; 2026: 362.6; 2027: 367.2; 2028: 369.4; 2029: 376.0; 2030: 380.6; 2031: 385.6. - Oil exports ($ Billion): 2023: 247.4; 2024: 223.4; 2025: 213.7; 2026: 260.6; 2027: 256.7; 2028: 251.8; 2029: 251.1; 2030: 248.3; 2031: 245.6. - Imports (f.o.b.) ($ Billion): 2023: -189.9; 2024: -213.8; 2025: -229.5; 2026: -247.9; 2027: -265.4; 2028: -282.4; 2029: -298.6; 2030: -315.3; 2031: -330.7. - Services ($ Billion): 2023: -60.7; 2024: -62.3; 2025: -59.3; 2026: -63.8; 2027: -59.1; 2028: -56.1; 2029: -52.8; 2030: -48.8; 2031: -44.5. - Current transfers ($ Billion): 2023: -51.4; 2024: -54.7; 2025: -65.6; 2026: -68.5; 2027: -68.5; 2028: -70.3; 2029: -71.6; 2030: -73.7; 2031: -76.8. Of which: Workers' remittances: 2023: -38.1; 2024: -45.7; 2025: -58.0; 2026: -60.9; 2027: -60.9; 2028: -62.7; 2029: -64.0; 2030: -66.1; 2031: -69.2. - Financial account ($ Billion) and components series, net errors and omissions, overall balance, financing, and change in SAMA's NFA provided. - Memorandum items include SAMA's total net foreign assets (US$ billions) and Net International Investment Position (% GDP). Notes in Table 3: - 1 Represents the return on NFA of SAMA, AGIs, and private sector. - 2 Imports of goods and services over the next 12 months excluding imports for transit trade. ### Monetary Survey, 2023–31 (Table 4 highlights) - Foreign assets (net) (Billions of SAR): 2023: 1,607; 2024: 1,520; 2025: 1,432; 2026: 1,527; 2027: 1,625; 2028: 1,717; 2029: 1,777; 2030: 1,851; 2031: 1,941. - SAMA foreign assets series (Billions of SAR): 2023: 1,564; 2024: 1,555; 2025: 1,637; 2026: 1,740; 2027: 1,846; 2028: 1,947; 2029: 2,016; 2030: 2,099; 2031: 2,199. - Domestic credit (net) (Billions of SAR): 2023: 2,721; 2024: 3,186; 2025: 3,625; 2026: 3,921; 2027: 4,250; 2028: 4,582; 2029: 4,930; 2030: 5,289; 2031: 5,670. - Claims on private sector (Billions of SAR): 2023: 2,519; 2024: 2,855; 2025: 3,147; 2026: 3,330; 2027: 3,583; 2028: 3,827; 2029: 4,079; 2030: 4,332; 2031: 4,596. - Money and quasi-money (M3) (Billions of SAR): 2023: 2,685; 2024: 2,921; 2025: 3,168; 2026: 3,333; 2027: 3,586; 2028: 3,851; 2029: 4,105; 2030: 4,331; 2031: 4,565. - Currency outside banks (Billions of SAR): 2023: 212; 2024: 229; 2025: 242; 2026: 295; 2027: 317; 2028: 339; 2029: 360; 2030: 379; 2031: 398. - Quasi-money and breakdown: Time and savings deposits and Other quasi-money deposits series provided. - Percent change and percentage-point changes for key aggregates shown (Foreign assets net, Domestic credit net, Claims on private sector, M3). ### Financial Soundness Indicators, 2016–25 (Table 5 highlights) - Number of operating commercial banks: 2016: 24; 2017: 25; 2018: 29; 2019: 25; 2020: 25; 2021: 26; 2022: 27; 2023: 28; 2024: 28; 2025: 29. - Total assets (percent of GDP): 2016: 88.2; 2017: 83.2; 2018: 70.8; 2019: 76.2; 2020: 99.3; 2021: 85.1; 2022: 74.8; 2023: 83.4; 2024: 92.5; 2025: 100.9. - Total loans (percent of GDP): 2016: 57.3; 2017: 52.2; 2018: 45.4; 2019: 49.7; 2020: 63.8; 2021: 57.6; 2022: 51.6; 2023: 57.7; 2024: 64.3; 2025: 70.9. - Regulatory capital to risk-weighted assets (percent): 2016: 19.5; 2017: 20.4; 2018: 20.3; 2019: 19.3; 2020: 20.3; 2021: 19.9; 2022: 19.9; 2023: 20.1; 2024: 19.6; 2025: 20.5. - Gross NPLs to gross loans (percent): 2016: 1.4; 2017: 1.6; 2018: 2.0; 2019: 1.9; 2020: 2.2; 2021: 1.9; 2022: 1.8; 2023: 1.5; 2024: 1.2; 2025: 1.0. - Total provisions to gross NPLs (percent): 2016: 177.0; 2017: 151.9; 2018: 157.2; 2019: 148.1; 2020: 134.7; 2021: 147.7; 2022: 124.5; 2023: 129.8; 2024: 134.2; 2025: 134.6. - Average pretax return on assets (percent): 2016: 1.8; 2017: 2.0; 2018: 2.1; 2019: 2.1; 2020: 1.5; 2021: 1.9; 2022: 2.0; 2023: 2.2; 2024: 2.2; 2025: 2.3. - Return on equity (percent): 2016: 12.6; 2017: 12.9; 2018: 13.8; 2019: 12.1; 2020: 10.3; 2021: 12.9; 2022: 13.7; 2023: 14.7; 2024: 15.0; 2025: 15.0. - Noninterest expenses to total income (percent): 2016: 38.0; 2017: 36.6; 2018: 36.3; 2019: 35.9; 2020: 43.3; 2021: 35.8; 2022: 33.4; 2023: 33.0; 2024: 32.3; 2025: 30.2. - Average lending spread (percent): 2016: 3.5; 2017: 3.8; 2018: 3.9; 2019: 3.9; 2020: 3.5; 2021: 3.2; 2022: 3.1; 2023: 3.1; 2024: 2.8; 2025: 2.7. - Key liquidity ratios and sensitivity-to-market-risk indicators presented for 2016–25. - Source: Saudi Central Bank (SAMA). Notes in Table 5: - 1 Total income includes net interest income and gross noninterest income. - 2 Short-term liabilities include demand deposits maturing in 90 days or less. Liquid assets include cash, gold, Saudi government bonds and treasury bills and interbank deposits maturing within 30 days. ### Selected Vision 2030 Targets and Progress, 2016–25 (Table 6 highlights) - Real non-oil GDP (USD billion): Baseline (start)1: 598; 2025 Target: 904; 2025 Status: 892; 2030 Target: 1,325. - Non-oil exports in percent of non-oil GDP (percent): Baseline: 16.9; 2025 Target: 38; 2025 Status: 22; 2030 Target: 50. - Private sector contribution to GDP (percent): Baseline: 44; 2025 Target: 47; 2025 Status: 51; 2030 Target: 65. - SME contribution to GDP (percent): Baseline: 21; 2025 Target: 21 (2024); 2025 Status: 23 (2024); 2030 Target: 35. - SME loans in percent of total bank loans (percent): Baseline: 2; 2025 Target: 11; 2025 Status: 11; 2030 Target: 20. - PIF’s assets under management (USD trillion): Baseline: 0.2; 2025 Target: 1.1; 2025 Status: 0.9; 2030 Target: 2.7. - FDI in percent of GDP (percent): Baseline: 1.0; 2025 Target: 3.4; 2025 Status: 2.8; 2030 Target: 5.7. - Local content share in non-oil sector expenditure (percent): Baseline: 52; 2025 Target: 60 (2024); 2025 Status: 55 (2024); 2030 Target: 75. - Local content share in oil-gas sector supply chain (percent): Baseline: 37; 2025 Target: 68 (2024); 2025 Status: 67 (2024); 2030 Target: 75. - Unemployment rate among Saudis (percent)3: Baseline: 12.3; 2025 Target: 7.0; 2025 Status: 7.2; 2030 Target: 5.0. (Note: target revised from 7 to 5 percent in 2024 after surpassing original targets.) - Female labor force participation rate among Saudis (percent)3: Baseline: 22.8; 2025 Target: 36.6; 2025 Status: 35.0; 2030 Target: 40.0. (Target revised from 30 to 40 percent in 2023.) - Percentage of university graduates employed within six months of graduation (percent): Baseline: 13; 2025 Target: 54; 2025 Status: 43; 2030 Target: 75. - Percentage of technical and vocational education graduates employed within six months of graduation (percent): Baseline: 14; 2025 Target: 56; 2025 Status: 47; 2030 Target: 65. - Number of employees in SMEs (million): Baseline: 4.8; 2025 Target: 7.6; 2025 Status: 8.9; 2030 Target: 10.2. - Saudi home ownership rate (percent): Baseline: 47; 2025 Target: 65; 2025 Status: 66; 2030 Target: 70. - Human Development Index, United Nations (score): Baseline: 0.86; 2025 Target: 0.88; 2025 Status: 0.90; 2030 Target: 0.94. - Average life expectancy (years): Baseline: 77.1; 2025 Target: 78.4; 2025 Status: 79.7; 2030 Target: 80.0. - Population clusters covered by healthcare services across the Kingdom (percent): Baseline: 84.13; 2025 Target: 97; 2025 Status: 97.5; 2030 Target: 99.5. - Healthcare Quality Index (percent): Baseline: 48; 2025 Target: 60; 2025 Status: 70; 2030 Target: 82. - PISA student performance in reading, science, and math (points): Baseline: 386; 2025 Target: 394 (2022); 2025 Status: 387 (2022); 2030 Target: 500. - Umrah pilgrims from outside the Kingdom (million): Baseline: 6; 2025 Target: 15; 2025 Status: 18; 2030 Target: 30. - Environmental Performance Index, Yale University (rank): Baseline: 95th; 2025 Target: 70th (2024); 2025 Status: 108th (2024); 2030 Target: 20th. Notes in Table 6: - 1 “Baseline” refers to 2016 for most indicators and other years around 2016 for some indicators. - 2 The blue shading in the source highlights interim targets surpassed in 2025. - 3 After surpassing the original targets, the unemployment rate target was revised from 7 to 5 percent in 2024, and the female labor force participation target was revised from 30 to 40 percent in 2023. *Source: IMF staff summary of the provided Saudi Arabia chapter content (figures and tables).* ### Annex I. External Sector Assessment ### Annex I. External Sector Assessment ### Overall assessment and policy implications - Overall Assessment: The external position in 2025 was assessed to be moderately weaker than the level implied by medium-term fundamentals and desirable policies. - Key points: - The external balance sheet remains strong despite a current account that shifted to a higher deficit of 2.6 percent of GDP. - Reserves remain adequate according to standard IMF metrics, although public saving is not sufficient from an intergenerational equity perspective. - Strong domestic absorption, including investment-driven imports associated with the transformation agenda, is expected to keep the current account in deficit over the medium term. - The central government’s non-oil primary balance to non-oil GDP ratio is expected to improve from -23.3 percent in 2025 to -17.2 percent in 2031. - Given the economy’s structure, external adjustment will be driven primarily by fiscal policy. - The pegged exchange rate continues to provide a credible policy anchor. - Potential Policy Responses: - Over the medium term, continued fiscal consolidation by the public sector, including through enhanced revenue mobilization and energy price reforms, would help raise public saving. - Sustained implementation of an ambitious structural reform agenda to diversify the economy and boost nonoil exports would help bring the current account balance closer to the norm. - Industrial policies should remain narrowly targeted to specific objectives where externalities or market failures prevent effective market solutions, while avoiding policies that favor domestic production over imports to prevent distortions in resource allocation and trade and investment decisions. - Policies should promote transparent, predictable and mutually beneficial trade policy frameworks. ### Foreign asset and liability position and trajectory - Background: - NIIP decreased to 56.6 percent of GDP at the end of 2025, down from 62.3 percent of GDP in 2024, mainly driven by increased external inflows to finance the current account deficit. - External debt rose to 37.6 percent of GDP in 2025, up from 29.5 percent in 2024, with its share in gross liabilities rising to 54 percent, from 50 percent in 2024. - Based on composition of external assets, portfolio and other investments, reserves, and outbound FDI currently account for around 55.2 percent, 28.6 percent, and 16.1 percent of total external assets, respectively. - In the medium term, the NIIP is expected to continue to decline, to about 38 percent of GDP by 2031, in line with sustained external funding needs to support the economic transformation under Vision 2030. - Assessment: - The external balance sheet remains strong. - Substantial accumulated assets represent both protection against vulnerabilities from oil price volatility and a store of exhaustible resource revenues for future generations. - 2025 (% GDP) key stock figures (as reported): - NIIP: 56.6 - Gross Assets: 126.2 - Res. Assets: 36.1 - Gross Liab.: 69.6 - Debt Liab.: 19.2 ### Current account: developments, projections, and assessment - Background and developments: - The current account deficit rose to 2.6 percent of GDP in 2025, up from 1.3 percent in 2024. - Drivers: lower oil export revenue (average oil export price declined), higher goods imports buoyed by continued investment and consumption growth, partly offset by a 17 percent surge in non-oil exports. - Crude oil production averaged 9.5 million barrels per day in 2025; oil exports fell to USD 213.7 billion. - Projections: current account deficit projected to narrow to about -0.3 percent of GDP in 2026 as higher oil prices more than offset lower export volumes due to ongoing disruptions, before widening to around 3 percent of GDP by 2031, reflecting the medium-term oil price outlook and sustained investment-driven imports. - Outlook: private investment is expected to grow thanks to domestic reforms, while private saving moderates as consumption picks up. - Assessment and model results: - Staff estimate a current account gap of -1.11 percent of GDP using the EBA-Lite CA model. - The cyclically adjusted current account is estimated at -1.91 percent of GDP, and the cyclically adjusted current account norm at -0.80 percent of GDP. - EBA-lite commodity module (Consumption Allocation Rules): - current account gap of -3.9 percent of GDP under the constant real annuity rule - current account gap of -6.5 percent of GDP under the constant real per capita annuity allocation rule. - The Investment Needs Model suggests a current account gap of -3.65 percent of GDP. - The estimated current account gap of -1.11 percent of GDP has an estimated range from -3.11 to 0.89 percent of GDP. The range is calculated using the standard error for Norway (2 percent), a comparable oil-rich economy in the EBA sample. - 2025 (% GDP) reported values: - CA: -2.6 - Cycl. Adj. CA: -1.91 - Staff Gap: -1.11 ### Real exchange rate (REER) - Background: - The riyal has been pegged to the U.S. dollar at a rate of 3.75 since 1986. - The nominal effective exchange rate remained relatively stable; the real effective exchange rate depreciated by about 0.7 percent in 2025, primarily driven by inflation differentials with trading partners. - As of March 2026, the real effective exchange rate remains close to its 2025 year-end level. - Assessment: - EBA-lite CA model: REER gap implies an overvaluation of 6.7 percent. - EBA-lite REER model: suggests an overvaluation of 18.3 percent. - Exchange rate movements have limited impact on Saudi Arabia’s competitiveness in the short term, as most exports are oil or oil-related products denominated in dollars. - There is limited substitutability between imports and domestically produced products, which have significant imported labor and intermediate-input content. ### Capital and financial accounts: flows and policy measures - Background: - Financial account recorded net inflows of $71 billion in 2025, following net inflows of $29.3 billion in 2024. - Trend driven by a rise in external financing—with growing portfolio and other investment inflows strengthening and net incurrence of other liabilities—to support domestic investment and consumption. - Moderation in accumulation of foreign assets by the sovereign wealth fund, PIF, and national oil company, Aramco. - Official reserve assets rose by about $23 billion in 2025, reaching $460 billion by year-end. - Assessment: - A lack of detailed information on the nature of financial flows complicates analysis of the financial account. - The strong reserve position and sizable assets of the PIF limit risks and vulnerabilities associated with capital flows. ### FX intervention and reserves level - Background: - Central bank’s official net foreign assets stood at $436.6 billion at end-2025, equivalent to 34.2 percent of GDP, about 13 months of imports, and 176 percent of the ARA metric. - In addition to central bank’s reserves, which are expected to stabilize at above 14 months of imports over the medium term, the PIF also holds sizeable foreign assets abroad. - Assessment: - Reserves serve both precautionary motives and savings for future generations. - Reserves are adequate for precautionary purposes as measured by the IMF’s metrics. - Significant buffers are also available through external assets held by the PIF and Aramco. - Nevertheless, fiscal consolidation is needed over the medium term to strengthen the current account and increase saving for future generations. *Annex I. External Sector Assessment, as provided in the source document.* ### Annex III. Figure 1. Illustrative Downside Scenario ### Annex III. Figure 1. Illustrative Downside Scenario ### Overview - The figure presents three scenario series: "Baseline", "Adverse (no policy)", and "Adverse (policy adjustment)" across multiple macro-financial indicators for 2025–2031. - Legend entries appearing in each chart: Baseline; Adverse (no policy); Adverse (policy adjustment). ### GDP in Constant Prices - Label: "GDP in Constant Prices (Bil. USD, Chain-linked 2023=100)" - X-axis: 2025 2026 2027 2028 2029 2030 2031 - Y-axis tick labels shown: 1,100; 1,200; 1,300; 1,400; 1,500; 1,600; 1,700 - Series compared: Baseline; Adverse (no policy); Adverse (policy adjustment) ### Overall Fiscal Balance - Label: "Overall Fiscal Balance (Percent of GDP)" - X-axis: 2025 2026 2027 2028 2029 2030 2031 - Y-axis tick labels shown: -12; -10; -8; -6; -4; -2; 0 - Series compared: Baseline; Adverse (no policy); Adverse (policy adjustment) ### Government Debt - Label: "Government Debt (Percent of GDP)" - X-axis: 2025 2026 2027 2028 2029 2030 2031 - Y-axis tick labels shown: 20; 25; 30; 35; 40; 45; 50; 55; 60 - Series compared: Baseline; Adverse (no policy); Adverse (policy adjustment) ### Non-oil Current Account Balance - Label: "Non-oil Current Account Balance (Percent of GDP)" - X-axis: 2025 2026 2027 2028 2029 2030 2031 - Y-axis tick labels shown: -20; -19.5; -19.0; -18.5; -18.0; -17.5; -17.0 (note: these ticks appear in the figure immediately above the subtitle "Non-oil Current Account Balance (Percent of GDP)") - Separate vertical axis ticks shown for the same panel: -30; -25; -20; -15; -10 - Series compared: Baseline; Adverse (no policy); Adverse (policy adjustment) ### Non-oil Primary Balance - Label: "Non-oil Primary Balance (Percent of Non-oil GDP)" - X-axis: 2025 2026 2027 2028 2029 2030 2031 - Y-axis tick labels shown: -3; -2; -1; 0; 1; 2; 3; 4; 5 - Series compared: Baseline; Adverse (no policy); Adverse (policy adjustment) ### Non-oil GDP Growth - Label: "Non-oil GDP Growth (Percent)" - X-axis: 2025 2026 2027 2028 2029 2030 2031 - Y-axis tick labels shown implicitly by the non-oil primary balance panel; the panel is titled "Non-oil GDP Growth (Percent)" and displays Baseline and adverse scenario series. - Series compared: Baseline; Adverse (no policy); Adverse (policy adjustment) *Source: Annex III. Figure 1, "Illustrative Downside Scenario."* ### 6. Regularly collect and ### 6. Regularly collect and monitor household debt statistics (e.g., DSTI, debt-to-disposable income, debt to GDP) and monitor household characteristics and debt distribution. ### Progress on household data and balance sheets - Implementation in progress. - SAMA and GASTAT are collecting and monitoring more comprehensive household data—including mortgage and consumer loan breakdowns published in SAMA's monthly bulletin. - They plan to establish household balance sheets. ### Related macroprudential actions and borrower-based measures - Recommendation 8: Implement a releasable capital buffer in the form of a positive neutral CCyB. - Implemented. - A 100 basis points CCyB has been activated in May 2025, effective in May 2026, and maintained unchanged in the context of the conflict. - Short-term (ST). - Recommendation 9: Re-evaluate the DSTI and LTV limits. - Implementation in progress. - SAMA has reviewed macroprudential borrower-based measures (BBMs) and considers that tightening the DSTI and LTV limits would be premature while credit growth has slowed materially. - Short-term (ST). ### Supervisory and regulatory context affecting household debt monitoring - SAMA has upgraded the Risk-Based Supervision (RBS) framework to five levels of consolidated supervision: overall group-wide level, consolidated bank level, solo bank level (including domestic and foreign bank branches), individual banking subsidiaries, and non-banking financial subsidiaries. - Implementation in progress for revising prudential regulations and supervisory approach. - SAMA completed a full assessment of existing risk-based supervision policy, procedures, and data templates; update of data templates, upgrade of internal systems, and implementation of the updated supervisory cycle have been initiated. - Short-term (ST). - SAMA is developing internal licensing guidelines and has issued an internal policy “Principles of financial integrity for licensing” covering identification of, and due diligence on, ultimate beneficial owners (UBOs). - Implementation in progress. - Short-term (ST). ### Financial stability and crisis-management measures with implications for household risk - Resolution and deposit protection developments: - Implementation in progress to amend the Law on SIFIs, establish a bank-specific liquidation framework, and a legal framework for deposit insurance. - Draft Banking Control Law (BCL) is at an advanced stage and submitted to the legislative authority; expected to be issued by a royal decree within the next two years (per authorities’ timeline). - A specific chapter introduced in the draft Banking Law on the deposit protection fund (DPF); SAMA plans implementing regulation aligned with Core Principles for Effective Deposit Insurance Systems (September 2025) issued by IADI. - Crisis Management Framework Development and Implementation Project (CMFDIP) under construction to align the safety net function with international best practice by end Q3 2026. - Implementation in progress (Short-term, ST). - Emergency Liquidity Assistance (ELA): - ELA framework incorporated into the crisis management framework; ELA governance completed and terms of reference being finalized. - The ELA framework is expected to be operationalized before end-2026. - Simulation exercises and collateral mobilization testing to follow operationalization. - Implementation in progress (I / ST). ### Financial integrity, payments, MSME, and climate risk actions relevant to household sector exposure - AML/CFT: - Conducted thematic inspections in 2025 focusing on key AML/CFT requirements; where deficiencies were identified, SAMA imposed sanctions including financial penalties and temporary suspensions. - Implemented (MT). - MSME definitions and data: - Implemented: An SME definition—coordinated by Monsha’at—has been adopted across public and private sector institutions and published. - SAMA disseminates quarterly MSME financing data across all segments and funding sources. - Periodic reviews planned to keep definitions aligned with SME realities. - Short-term (ST). - Payments and digital financial services oversight: - Implemented: “Oversight Framework of the Payment Systems and Their Operators” published on SAMA’s website on March 23, 2026. - Short-term (ST). - Climate-related financial risk: - Implementation in progress: SAMA incorporated climate-related financial risks into the updated RBS framework and supervisory review process and is considering issuing regulatory and supervisory expectations. - SAMA collaborates with national authorities to develop national climate-related objectives, a disclosure guideline for listed companies, and a national taxonomy of sustainable activities. - Short-term (ST). ### Key Annex VI surveillance indicators with implications for household debt sustainability - Non-oil revenue to non-oil GDP ratio: - Declined from 14.2 percent in 2024 to 13.5 percent in 2025. - Fuel subsidy and price actions affecting household disposable income: - Diesel price increase in January 2026; cap on gasoline prices remains in place, diesel remains the most subsidized fuel. - Countercyclical capital buffer (CCyB) impact: - A CCyB, effective from May 2026, helped decelerate bank credit growth already before its implementation. - Crisis management and ELA: - A crisis management framework—including ELA—is expected to be fully operational by end-2026. *Source: 1sauea2026001 - 6. Regularly collect and monitor household debt statistics (excerpts, implementation status as of May 2026).* ### Annex VII. AI Strategy: Potential Gains and Challenges Ahead ### Annex VII. AI Strategy: Potential Gains and Challenges Ahead ### Vision 2030 and National AI Strategy - Positioning Saudi Arabia at the forefront of global AI adoption and development is a central pillar of Vision 2030. - National Strategy for Data and AI (launched in 2020; led by the Saudi Data and Artificial Intelligence Authority, SDAIA) aims to: - attract investment, - expand AI talent, - establish an enabling regulatory environment, - scale AI applications across the economy. - Most national AI targets—notably for AI workforce and investment, both local and FDI—have already surpassed the interim targets for 2025. - AI is one of the six priority areas under the PIF’s recalibrated strategy for 2026-30, reorienting capital allocation toward building domestic ecosystems and long-term sector development. ### Public- and Private-Sector Adoption and Institutional Roles - Public sector leadership: - The Digital Government Authority steers AI deployment across public entities to improve service delivery. - SDAIA has developed regulatory and measurement frameworks, including the National AI Index, to track progress and set targets across government entities. - The PIF plays a catalytic role in developing the domestic AI ecosystem with applications across: - healthcare (e.g., virtual hospital, AI-assisted diagnostics), - education (e.g., national AI curricula), - finance (e.g., fraud detection, customer personalization), - energy (e.g., Aramco MetaBrain AI). - Private-sector uptake is accelerating but AI investment remains primarily state- and PIF-led. ### AI Preparedness, Exposure, and Workforce Implications - Saudi Arabia’s AI preparedness and exposure: - High AI preparedness relative to the MENA region and above the average of EMs, but behind frontier AEs. - Around 45 percent of jobs in the country are highly exposed to AI (compared with an AE average of about 57 percent and EMs in MENAP average of 23 percent). - AI exposure among Saudi nationals: about 80 percent of the employed are considered highly exposed. - AI exposure among foreign workers: about 30 percent are highly exposed. - Sectoral distribution: - AI-exposed employment concentrated in non-tradable sectors (e.g., construction, wholesale and retail trade), which account for around 40 percent of total employment. - AI-intensive sectors (ICT and financial services) currently account for 6 percent of employment, but some are growing fast and could reap further growth gains from AI adoption. ### Modeled Growth Impacts and Scenarios - Model-based estimates on productivity and growth: - Given current levels of AI preparedness and exposure, AI adoption could raise Saudi Arabia’s real GDP growth by 0.1-0.4 percentage points yearly over the next decade. - In an optimistic scenario—characterized by scaled-up AI investment aligned with announced public and private deployment plans, closing the preparedness gap with AEs, and stronger exports of AI services—annual growth gains could reach up to 0.6 percentage points, lifting GDP by up to 6 percent in a decade. ### Opportunities and Risks for Labor Markets and Diversification - Opportunities: - AI adoption could boost productivity, accelerate growth, and increase scope for structural transformation. - Early gains visible in healthcare, education, and financial services through public-sector leadership and targeted applications. - Risks: - Transitional labor market pressures as AI substitutes for some occupations and complements others—may intensify in industries where substitution is likely. - Productivity gains may be limited if AI investments fail to deliver expected returns. ### Execution Constraints and Downside Risks - Talent constraints: - Shortages in highly specialized AI research and engineering roles amid global competition. - Domestic training pipelines take time to mature; visa-processing and mobility frictions may slow talent acquisition. - Need for reskilling programs and adequate social protection for low-skill workers displaced by AI. - Limited private sector depth: - Private firms may have limited appetite for long-term, high-risk AI projects without proven profit prospects. - Data governance and regulation: - Effective deployment requires clear data governance, cross-border data frameworks, and regulatory certainty; balancing data sovereignty with international integration is critical. - Project prioritization and execution risk: - Giga projects could pressure sovereign balance sheets and domestic banks’ funding capacity; rollout depends on sustained funding, adequate energy supply, and coordination across agencies. - Uncertain external demand: - Viability of large AI data center capacity depends partly on sustained external demand from advanced markets; intensifying global and regional competition raises risk of overcapacity. - Geopolitical risk: - AI data centers and data routes are targetable physical assets; disruption to infrastructure and data connectivity could materially weaken external demand and investor confidence. ### Policy Implications and Strategic Direction - To realize AI benefits while mitigating risks, Saudi Arabia will need to: - further strengthen AI adoption across sectors, - address talent shortages and scale reskilling and social protection measures, - deepen private-sector participation and risk-sharing, - enhance data governance and cross-border frameworks, - prioritize and sequence projects to manage fiscal and financing risks, - remain adaptive to rapidly evolving external landscapes including technological change, global competitive pressures, and evolving regulation. - The ultimate objective: ensure AI investment delivers broad-based productivity gains and supports economic diversification. *Source: Annex VII. AI Strategy: Potential Gains and Challenges Ahead, 1sauea2026001* ### 0.5 percent per annum through an Associated Agreement with the PRGT. ### 0.5 percent per annum through an Associated Agreement with the PRGT. ### PRGT subsidy resources - As of end-December 2025, Saudi Arabia’s total subsidy contributions to the PRGT, including interest earned on outstanding balance of the Trust, was estimated at SDR 140.5 million, with the remaining balance amounting to SDR 94.0 million. - Implicit subsidy on February 1989 loan: - Implicit subsidy earned on the balances of the February 1989 loan was estimated at SDR 14.7 million (as of end-2005). - On June 24, 2025, the second 2023 borrowing agreement (SDR 2,025 million) was amended and restated to allow drawings on concessional terms (i.e., at interest rate of 0.05 percent per annum) until the agreement generates SDR 150 million (in nominal terms) in implicit subsidy contribution. Thereafter, the loan will be remunerated at the SDR interest rate. - As of end-May 2026, this PRGT loan generated about SDR 3.7 million in implicit subsidies. - Subsidy resources generated from deposits: - In March 2001, Saudi Arabia agreed to support the PRG-HIPC Trust with deposit contributions totaling SDR 94.4 million, of which SDR 16.71 million was contributed by the Kingdom of Saudi Arabia and SDR 77.67 million by SFD. - In April 2006, these deposits were repurposed and extended to end-December 2021 with an additional deposit of SDR 38.2 million from SFD, to provide SDR 40 million (end-2005 NPV terms) in subsidy resources to support the Exogenous Shocks Facility (ESF). - Saudi Arabia’s deposit of SDR 16.71 million matured on December 31, 2021, and the principal was transferred as grant contribution to the PRGT General Subsidy Account. - SFD’s aggregate deposit amount of SDR 115.87 million was made at an interest rate of 0.5 percent and after being extended several times, it was repaid on September 4, 2024. - Subsidy resources from other contributions: - In April 2005, Saudi Arabia agreed to provide a grant contribution of $4 million (equivalent to SDR 2.7 million) to subsidize Emergency Natural Disaster Assistance to low-income countries, of which SDR 0.15 million was transferred to the PRGT General Subsidy Account upon termination of the EPCA/ENDA Administered Subsidy Account in February 2014. - In October 2012 and October 2013, Saudi Arabia provided subsidy resources to the PRGT through the transfer of its full share in the distributions of the general reserve attributed to windfall gold sale profits, totaling SDR 71.87 million. ### Other initiatives — Capacity Development (CD) support - Measured by received contributions, Saudi Arabia is the third largest donor to the IMF’s Capacity Development (CD). - In August 2024, Saudi Arabia signed an agreement to deliver $279 million over ten years, through the IMF-Saudi Arabia CD Partnership. - Now in its third year of operations, the CD Partnership has already delivered $53.9 million in CD, with plans for a further $29.2 million in FY27. - The partnership is built upon three pillars: - The meaningful expansion of capacity development work in the Middle East, North Africa and Pakistan, through the Regional Office in Riyadh, the Middle East Regional Technical Assistance Center, and the Somalia Country Fund. CD Support is also delivered to Saudi Arabia itself. - Support for urgent and critical capacity development work in sub-Saharan Africa, delivered through the IMF’s network of Regional Capacity Development Centers. - Support to the IMF’s thematic funds, enabling capacity development work in the IMF’s key competence areas, like taxes and public finance, financial sector stability, anti-money laundering, and statistics. - Prior financing and projects: - Financial Sector Stability Fund: $2 million. - Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) Thematic Fund: $3.9 million over three phases so far. - Saudi Arabia also finances a bilateral project providing CD support to the Ministry of Finance’s operational work on Macro Fiscal Forecasting Frameworks. ### Exchange rate arrangement - The Saudi Arabian Riyal is formally pegged to the U.S. dollar and the exchange rate arrangement is classified as a conventional peg. - Saudi Arabia maintains security-related exchange restrictions pursuant to UN Security Council resolutions 1267 and 1373. - Saudi Arabia has accepted the obligations of Article VIII, Sections 2(a), 3, and 4 of the IMF’s Articles of Agreement, and maintains an exchange system that is free of multiple currency practices and restrictions on the making of payments and transfers for current international transactions, except for restrictions maintained solely for the preservation of national or international security, in accordance with the procedures set forth in Executive Board Decision 144-(52/51). ### Last Article IV Consultation - Saudi Arabia is on the standard 12-month consultation cycle. - The last Article IV consultation was held in person during May 12-26, 2025. - The staff report was considered by the Executive Board on July 28, 2025, and published on August 4, 2025. - Reference URL included in source: https://www.imf.org/en/publications/cr/issues/2025/08/02/saudi-arabia-2025-article-iv-consultation-press-release-and-staff-report-569252 ### Resident Representative - No resident representative is stationed in Saudi Arabia. ### Relations with the World Bank Group (As of June 30, 2026) - World Bank Country Page: https://www.worldbank.org/en/country/saudiarabia *Source: SAUDI ARABIA — INTERNATIONAL MONETARY FUND.* --- _Source: https://www.imf.org/-/media/files/publications/cr/2026/english/1sauea2026001.pdf_