Saudi Arabia’s Path Forward Amid Lower Oil Prices

IMF News, December 18, 2025

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Next year will be pivotal for Saudi Arabia as it moves beyond the favorable tailwinds of 2022–2024 into a more challenging environment characterized by lower oil prices and rising financing needs.
The country is strategically shifting some spending priorities toward AI and advanced technologies as part of broader diversification efforts under Saudi Vision 2030.
Key strengths: reduced exposure to oil fluctuations, low public debt-to-GDP ratios, and ample foreign assets.

Oil prices fell nearly 30 percent below their 2022 peak, yet the non-oil economy maintained strong momentum in 2025.
Progress linked to Saudi Vision 2030 reforms:
- Diversification gaps with emerging markets have narrowed.
- The business environment now rivals that of advanced economies.
- Private sector job creation has surged, particularly among women.
- Unemployment rates reached record-lows.
Continued reforms are essential to close remaining gaps with advanced economies and keep the transformation on track.

The recent decision to reprioritize some large investment projects helped:
- Focus spending on higher-impact areas.
- Mitigate the risk of economic overheating.
Over the medium term, critical fiscal measures include:
- Continued non-oil revenue mobilization (non-oil revenue has doubled over the past five years).
- Energy subsidy reform.
- More efficient public spending.
Fiscal institutions and debt/asset management priorities:
- Adhere to established spending ceilings.
- Continue prudent debt management.
- Develop a proper strategy for managing sovereign assets and liabilities.
Multi-year, consistent frameworks for spending decisions are vital as funding pressures linked to large investment projects rise.

Strong financial sector oversight will support healthy credit growth as banks increasingly rely on short-term external funding.
The Saudi Central Bank should maintain vigilance in monitoring emerging risks and proactively deploy prudential measures to preserve financial system resilience.
Deepening capital markets is recommended to:
- Allow companies to raise more financing via bonds and equity.
- Ease pressure on banks.
- Facilitate credit for small and medium enterprises.
- Create a more balanced mix of funding for the economy.

Sustaining growth will increasingly depend on:
- A skilled workforce, especially in fast-growing sectors like technology and hospitality where skills gaps are most pronounced.
- A vibrant private sector supported by deeper reforms.
Recommended reforms and actions:
- Ensure workers have the right skills for emerging industries.
- Steadfastly implement recently enacted laws that ease access for foreign investors to foster an investor-friendly environment and attract private investment.
- Use the sovereign wealth fund as a catalyst to spur new projects and partnerships while leaving ample room for domestic and international private investors.

IMF News — Saudi Arabia’s Path Forward Amid Lower Oil Prices (By Amine Mati and Yuan “Monica” Gao Rollinson, December 18, 2025).