Dubai – The International Monetary Fund forecasts that non-oil sectors will significantly enhance the resilience of the Saudi Arabian economy against external disturbances, despite anticipated short-term contractions driven by regional instability affecting energy production and global supply chains.
According to the October 2026 edition of its Regional Economic Outlook, the Kingdom’s real gross domestic product is expected to contract by 3.3 percent in 2026. This decline primarily stems from reduced activity in the hydrocarbon sector during the first half of the year, exacerbated by disruptions to maritime navigation and logistics routes, particularly concerning the Strait of Hormuz and the Bab al-Mandab.
However, the report highlights that non-oil activities have demonstrated considerable robustness, outperforming energy-related sectors. This stability is attributed to sustained investment momentum and economic diversification programs aligned with Vision 2030. The tourism sector, for instance, recorded the lowest decline in hotel occupancy rates compared to other nations directly impacted by regional tensions, indicating a relative capacity to maintain service sector activity under current conditions.
Strong Recovery Expected in 2027
The IMF anticipates a vigorous rebound in the following year, with real GDP growth projected at 7.9 percent in 2027. This recovery is linked to the gradual normalization of energy production, improved security and trade conditions, and the restoration of global supply chain flows. On a medium-term horizon, growth is expected to stabilize at approximately 3.6 percent by 2031, reflecting a return to a more sustainable trajectory after recent volatility.
Inflation is estimated to average 2.7 percent in 2026 before settling near 2 percent in subsequent years. Factors such as subsidies, price controls, and fiscal discipline have helped contain inflationary pressures, maintaining relative price stability compared to other regional economies. Gulf central banks, including Saudi authorities, have coordinated monetary policies with the US Federal Reserve to support financial market stability.
Fiscal Discipline and Strategic Investments
Saudi fiscal policy in 2026 remains disciplined, allowing room to direct spending toward strategic priorities like infrastructure development and structural reforms. The Kingdom entered this period of regional disturbance with comfortable financial reserves, aiding in absorbing temporary shocks to the current account and official reserves. These buffers are crucial amid heightened regional and global uncertainty.
Investment in technology and artificial intelligence represents a key growth area. Announced investments in AI infrastructure and data centers exceed 5 percent of GDP, expected to boost productivity and medium-term growth. Structural reforms, including labor market flexibility and human capital investment, remain vital for enhancing economic resilience and reducing reliance on traditional income sources.
This story was produced in the newsroom from the disclosed sources named above.
