Economic Outline

Economic Indicators

Saudi Arabia is the largest economy in the Middle East and the richest Arab country. The policy of large-scale public works undertaken by the authorities, as well as foreign direct investment and the soundness of the banking and financial system, have enabled the country to become the number one regional economy and one of the largest in the world. However, the economy of Saudi Arabia is almost entirely based on oil, with GDP growth being closely linked to real oil growth. After the sustained growth recorded in 2022 (+8.7%) due to high oil prices, GDP decelerated to 0.8% in 2023 amid unfavourable base effect, reductions in oil production (-7%), and decreased energy prices. Increasing investment and private consumption should be the main drivers in 2024, with the IMF forecasting a growth rate of 4%, with a further uptick to 4.2% the following year.

In 2023, Saudi Arabia reported a budget deficit instead of the previously anticipated surplus, primarily attributed to "expansionary" spending strategies and "conservative revenue estimates." The government anticipates a budget deficit of 1.9% of GDP in 2024, followed by 1.6% in 2025, and 2.3% in 2026. Total expenditure rose to SAR 1.262 billion in 2023, from an earlier estimate of SAR 1.114 billion, and should slow down marginally to SAR 1.251 billion in 2024. The government aims to maintain fiscal discipline by reducing subsidy spending and capital expenditure, leveraging the sovereign wealth fund. Nevertheless, addressing the public wage bill, which constitutes approximately 40-45% of total fiscal expenditures, will be crucial in reducing the budget deficit. According to official figures, as of December 2023, Saudi Arabia's total outstanding direct indebtedness stood at SAR 1,050.3 billion (equivalent to USD 280.1 billion), consisting of SAR 644.4 billion (USD 171.8 billion) in domestic indebtedness and SAR 405.9 billion (USD 108.2 billion) in external indebtedness. The IMF estimated the overall debt-to-GDP ratio at 24.1% in 2023, with an expected decrease to 20.7% by 2025. Meanwhile, inflation inched down to 2.5% but it still  hovered above the 2010-2022 average of 2% on the back of robust demand for housing and tourism inflows.

The standard of living in Saudi Arabia is one of the highest in the Middle East, with a GDP per capita (PPP) of USD 68,453  (IMF, 2023). According to the latest data available from the Saudi General Authority for Statistics, unemployment among Saudis rose to 8.6% in the third quarter of 2023, compared to 8.3% in the second quarter of the year, while the overall unemployment rate stood at 5.1%.

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