Saudi economic growth to speed up in 2025, 2026: Riyad Capital

Non-oil sector to maintain strong growth momentum, oil activities to recover: Riyad Capital

Riyad Capital’s projections showed that the Saudi economy is set for a notable acceleration in growth rates during 2025 and 2026.

Non-oil sectors are likely to maintain a strong growth trajectory, with a projected expansion of 4.6% in 2025 and 4.3% in 2026, after recording a growth rate of 5.2% in 2024. This extends a continuous period of economic expansion that exceeded six years at a rate of more than 4%.

The oil sector is expected to grow by 5.3% in 2025, accelerating to around 6.4% in 2026, adding that the sector saw significant expansion in 2025 following the reversal of the voluntary production cuts implemented in 2023, which enabled an output increase of roughly 1 million barrels per day.

Riyad Capital noted that, amid expectations of an oversupplied oil market in the first half of 2026, OPEC+ decided to maintain current production levels without increase during the first quarter of the year, with the same approach likely to continue in the second quarter before considering any potential expansion in the second half.

The brokerage firm expected overall economic growth to rise to 4.3% in 2025, compared to 2% recorded the previous year, while the Saudi economy expected to sustain strong momentum in 2026 with a projected growth rate of 4.4%. It stated that the government has begun adopting a gradual fiscal consolidation policy after three years of strong expansionary spending, with cumulative government expenditures rising 32% between 2021 and 2024. This shift is reflected in a spending reduction of about 3% in 2025 compared to the previous year.

The company pointed out that this cautious approach is expected to continue into 2026. Accordingly, the fiscal deficit is projected at 5.2% of GDP in 2025, narrowing to 3.5% in 2026.

Riyad Capital also expected inflation to continue its downward trajectory in 2026, driven by the persistent decline in rental inflation, the most influential component of price levels so far. Average inflation is forecast at 1.9% in 2026, compared to an average of 2.1% in 2025.

On the monetary policy front, the US Federal Reserve is likely to cut the federal funds rate from its current 4% to around 3.25% by the end of next year. Consequently, the Saudi Central Bank is expected to reduce the official repo and reverse repo rates by the same margin.

Riyad Capital further projected that the 3-month SAIBOR rate will decline to around 4.10% by the end of 2026, marking a drop of roughly 80–90 basis points from current levels.