Saudi Arabia's Economy Grows 2.8% in Q1 2026 as Non-Oil Activities Drive Expansion

Saudi Arabia's economy expanded by 2.8% in the first quarter of 2026, demonstrating resilience amid regional pressures and oil market volatility, with non-oil activities serving as the primary driver of this growth. According to flash estimates from the General Authority for Statistics, as reported by Asharq Al-Awsat, this performance underscores the strength of the kingdom's economic foundations despite challenges like fluctuating oil production and geopolitical tensions. The non-oil sector's robustness highlights ongoing progress in diversification efforts under Vision 2030, reducing reliance on hydrocarbons.

This positive start to the year builds on momentum from 2025, when the economy grew by an estimated 4.5% overall, with non-oil activities expanding 4.9% and even the oil sector posting 5.6% growth for the full year. Revised data showed first-quarter 2025 growth reaching 3.4% year-on-year, up from initial estimates, while the fourth quarter hit 5%, fueled by a 10.8% surge in oil alongside steady 4.3% non-oil gains. Such trends affirm Saudi Arabia's ability to outperform global averages, as analysts note the non-oil economy's role in sustaining stability even as oil revenues faced headwinds from lower global prices in 2025.

Looking ahead, forecasts point to continued expansion, with the Ministry of Finance projecting 4.6% GDP growth for 2026, driven by a 5% rise in non-oil output supported by rising domestic demand, improved employment, and higher private consumption and investment. Standard Chartered anticipates 4.5% growth, matching non-oil sector performance and outpacing the global average of 3.4%, thanks to OPEC+ production easing and efforts to attract foreign direct investment. KPMG echoes this outlook, expecting robust non-oil growth into 2026 amid fiscal reforms that boost non-oil revenues, even as total public expenditures are set to dip slightly to SAR 1.313 trillion from 2025 levels.

The 2026 pre-budget statement outlines government revenues at SAR 1.15 trillion and expenditures at SAR 1.13 trillion, resulting in a SAR 166 billion deficit— a 63% increase from 2025 but framed as supportive of structural transformation. Finance Minister Mohammed Al-Jaadan emphasized maintaining fiscal sustainability while prioritizing development spending and reforms to enhance efficiency. Public debt-to-GDP is projected to rise to 36% by year-end, yet this is viewed as a catalyst for diversification, with policies aimed at broadening funding sources and integrating Saudi markets into global indices to draw more capital inflows.

This growth trajectory matters deeply for Saudi Arabia's residents and the broader region, as it signals economic stability amid global uncertainties, creates jobs through non-oil sectors like manufacturing, trade, and logistics, and advances Vision 2030 goals of reducing oil dependency. Stronger non-oil performance bolsters tax revenues and corporate profits, fostering private sector dynamism. Affected parties include investors eyeing opportunities in an economy expected to exceed IMF global projections of , as well as policymakers balancing higher capital spending with spending efficiency.