Saudi Arabia Revises Fiscal Outlook for 2026
Saudi Arabia’s finance ministry has released updated fiscal projections, highlighting a larger-than-anticipated budget deficit for 2026. According to the ministry’s latest pre-budget statement, the kingdom now expects a fiscal deficit amounting to 3.3% of its gross domestic product (GDP) in 2026. This represents a slight increase from the previous estimate of 2.9% outlined in the 2025 budget plan.
The projected shortfall for 2026 equals approximately 165 billion Saudi riyals ($44 billion), reflecting a continued trend of deficit spending as the kingdom invests heavily in its economic transformation agenda.
Increased Deficit Forecast for 2025
The finance ministry also revised its 2025 deficit estimate to 245 billion riyals ($65.33 billion), which would account for 5.3% of GDP. This is significantly higher than the 101 billion riyals deficit predicted in the 2025 budget published in November 2024.
The increase is attributed to rising expenditures as Saudi Arabia accelerates its development initiatives under the ambitious Vision 2030 framework, a national strategy aimed at reducing the country’s dependence on oil revenue and building a more diverse and sustainable economy.
Revenue and Spending Plans for 2026
In terms of fiscal planning for 2026, the government anticipates total expenditures reaching 1.31 trillion riyals ($349 billion), while revenues are expected to total 1.14 trillion riyals ($304 billion). The gap between revenue and spending underlines the kingdom’s commitment to funding long-term economic transformation efforts despite short-term fiscal imbalances.
Saudi Arabia’s spending strategy includes large-scale investments in infrastructure, tourism, technology, and other non-oil sectors, all critical to the execution of Vision 2030 initiatives.
Vision 2030: Diversifying the Economy
Launched in 2016, Vision 2030 is Saudi Arabia’s blueprint for economic diversification. The program aims to reduce the kingdom’s reliance on oil by fostering growth in various sectors including entertainment, tourism, renewable energy, and manufacturing.
To fund this transformation, the government has committed hundreds of billions of dollars in investments, much of which is being channeled through its sovereign wealth fund, the Public Investment Fund (PIF). The result is a deliberate strategy of short-term deficits in exchange for long-term economic sustainability and growth.
Economic Growth Projections Remain Strong
Despite the rising deficits, the Saudi economy is expected to expand over the next two years. The finance ministry projects real GDP growth of 4.4% in 2025 and 4.6% in 2026, primarily driven by non-oil economic activities. These forecasts reflect the kingdom’s efforts to stimulate the private sector and attract foreign investment.
A Reuters poll conducted in July 2025 among 20 economists indicated that Saudi Arabia’s GDP growth for the current year is likely to reach 3.8%, a substantial increase compared to the modest 1.3% growth recorded in 2024.
Furthermore, the International Monetary Fund (IMF) raised its 2025 GDP growth projection for Saudi Arabia from 3% to 3.5% in June, citing strong demand for state-led projects and the easing of oil production cuts by the OPEC+ alliance.
OPEC+ and Oil Production Strategy
The OPEC+ group, which includes Saudi Arabia and major oil-producing countries, has been gradually phasing out its oil production cuts. This move is expected to bolster the kingdom’s revenues and provide additional momentum to its broader economic agenda.
Oil continues to be a major source of income for Saudi Arabia, but the government’s intention is to balance oil revenues with income from other sectors. This approach is evident in the country’s budget planning, where non-oil activities play an increasingly important role in driving economic growth.
Global and Regional Implications
Saudi Arabia’s fiscal policies and economic performance have significant implications not just for the Middle East but also for global markets. As the largest economy in the Arab world and a key player in global energy markets, the kingdom’s financial health is closely watched by investors and policymakers worldwide.
The nation’s willingness to accept larger deficits in the near term suggests a high level of confidence in its ability to generate sustainable growth through diversification. However, it also reflects the challenges involved in transforming an oil-dependent economy amid volatile global markets and shifting geopolitical dynamics.
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