IMF lifts Saudi Arabia's 2025 growth forecast to 3.6%
The upgrade means Saudi Arabia is now expected to outpace the global average growth rate of 3 per cent next year, and surpass that of most neighbouring Gulf states, according to the IMF's latest World Economic Outlook Update, released on Tuesday.
IMF raises Saudi growth forecast again
The Fund also raised its 2026 projection for the Kingdom to 3.9 per cent, anticipating a sustained pickup in economic activity before growth stabilises at around 3.5 per cent in the medium term.
Saudi Arabia raised crude output for a second consecutive month in June to 9.4 million barrels per day, as the OPEC+ group began unwinding voluntary supply curbs. That follows a period in which the Kingdom's production fell to an average of 9 million bpd in 2023 – its lowest since 2010 – down from a record 10.6 million bpd in 2022.
The IMF now expects oil prices to fall by 13.9 per cent this year, a smaller drop than the 15.5 per cent forecast in April. While geopolitical tensions between Israel and Iran temporarily lifted prices, the report said bearish fundamentals had since returned to focus.
Despite oil's outsized role in the budget – still providing nearly two-thirds of Saudi government revenues – the IMF highlighted the resilience of the non-oil economy as a key driver of growth. Non-oil GDP is forecast to grow by 3.4 per cent in 2025, slightly below the 4.2 per cent recorded in 2024, before stabilising near 3.5 per cent by the end of the decade.
The IMF noted that labour market conditions have improved, with unemployment among Saudi nationals falling to a record low of 7 per cent in 2024. Inflation remains contained near 2 per cent, aided by the riyal's peg to the US dollar and an extensive subsidy framework.
In terms of fiscal policy, the IMF said increased government spending in 2025, resulting in a budget deficit above initial targets, was justified. It warned that cutting expenditure in response to lower oil prices would risk procyclical fiscal tightening and weigh on growth.
Instead, it recommended gradual fiscal consolidation over the medium term through higher non-oil revenues, reduced energy subsidies, and streamlined public spending.
The Saudi banking sector remains resilient, despite some pressure from strong credit growth and rising funding costs, the Fund said. The central bank has introduced a countercyclical capital buffer and continues to strengthen its regulatory framework.
The report emphasised the importance of structural reforms to support economic diversification and reduce reliance on hydrocarbons. It urged continued progress in governance, human capital, digitalisation, and capital market development, regardless of oil price fluctuations.
Among the 30 countries highlighted in the IMF's latest outlook, only China saw a larger upward revision to its 2025 growth forecast. The global economy is now projected to grow 3 per cent in 2025, up from 2.8 per cent in April, and 3.1 per cent in 2026.
'Risks to the global economy remain firmly to the downside,' IMF Chief Economist Pierre-Olivier Gourinchas said on Tuesday. 'The current trade environment remains precarious.'
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