Saudi non-oil sector resilient amid challenges: World Bank

Safaa El Tayeb El-Kogali, the World Bank's Country Director for the GCC Countries, said that the outlook for Saudi Arabia’s economy in 2025 is broadly positive, with growth projected at 2.8%, gradually strengthening to 4.6% by 2027.

This anticipated increase is expected to be supported by the phase out of OPEC+ production cuts, which will benefit the oil sector, alongside continued strength in non-oil activities, she added, in an interview with Argaam.

The performance of Saudi Arabia’s non-oil sector in 2024 stands out as a key highlight. While the oil sector faced headwinds from global production dynamics, the non-oil economy maintained strong growth at 4.3%. This resilience reflects the progress made in diversifying the economic base and enhancing the role of services and domestic consumption, said El-Kogali.

She added that the non-oil sector will likely remain a key driver of growth, buoyed by government initiatives to enhance infrastructure, attract investment, and promote private sector development.

She also indicated that the fiscal deficit widened in 2024, partly due to sustained public expenditure and fluctuating oil revenues, noting that, nonetheless, inflation remained low and stable, helping to maintain consumer purchasing power and macroeconomic stability.

According to El-Kogali, the private sector is expected to become the main engine of sustainable growth in Saudi Arabia. To enable this, the government plays a critical role in creating the right conditions—through investment in infrastructure, human capital, and institutional reforms.

The World Bank findings indicate that government consumption spending has a positive but relatively modest effect on non-hydrocarbon output, with fiscal multipliers ranging between 0.1 and 0.45 across GCC countries. These fiscal multipliers tend to be higher during economic downturns, highlighting the role of government spending as a stabilizing force when growth slows, said the top official.

On the other hand, government investment spending shows a smaller immediate impact, with a marginal increase in potential output estimated at around 0.07% for each one-percentage-point rise in investment, which is in line with literature, she added.

However, El-Kogali warned that Saudi Arabia faces both short-term and long-term challenges to sustaining growth, saying that, in the short term, global trade and economic uncertainty, fluctuating oil prices and production levels, and the potential spillovers from regional conflicts pose key risks to stability and growth momentum. Meanwhile, over the longer term, structural vulnerabilities remain, mainly the continued dependence on hydrocarbon revenues, and the persistent decline in productivity, which poses a challenge to competitiveness and economic diversification.

Addressing these issues through targeted reforms, innovation, and skills development will be essential to achieving the Kingdom’s long-term growth objectives, she added.