Saudi Arabia’s Gross Domestic Product (GDP) is set to grow by 1.4 percent in 2024. According to S&P Global, growth will accelerate to 5.3 percent in 2025. S&P Global highlighted that the anticipated US Federal Reserve rate cuts will likely benefit emerging markets like Saudi Arabia, which boasts solid growth fundamentals and rising capital inflows.
Reforms Boosting Economic Transformation
The US-based credit rating agency emphasized that Saudi Arabia’s ongoing diversification strategy aims to strengthen the non-oil private sector. The country is reducing its dependence on crude revenues. The report noted that the economic reforms underway are creating a social, economic, and political transformation. These changes will significantly boost domestic demand in sectors such as household spending, tourism, and construction.
Long-Term Economic Forecast
S&P Global predicts Saudi Arabia’s economy will grow by 4% in 2026, followed by a slight decline to 3.6% in 2027. Economists expect the inflation rate to average 1.8% in 2024 and 1.6% in 2025. They forecast the unemployment rate will drop to 4.7% in 2024 and 4.4% in 2025.
Despite these optimistic forecasts, S&P Global warned of several risks facing emerging markets. These include uncertainties surrounding the upcoming US election, which could impact trade and fiscal policies. Protectionist trade measures may reduce trade volumes and increase inflation, placing pressure on interest rates and discouraging capital flows. The agency also highlighted the high degree of uncertainty surrounding China’s economy and the ongoing conflict in the Middle East, both of which could pose risks to global growth.
OECD’s Economic Projections
In a separate report, the Organisation for Economic Co-operation and Development (OECD) forecasted Saudi Arabia’s economic growth at 1% in 2024 and 3.7% in 2025. The global economy is projected to expand by 3.2% in both years, up slightly from 3.1% in 2023. The OECD expects inflation in G20 economies to ease, with headline inflation dropping to 5.4% in 2024 and 3.3% in 2025.
Call for Fiscal Prudence
OECD Secretary-General Mathias Cormann stressed the need for cautious monetary policy until inflation returns to central bank targets. He called for stronger efforts to improve spending efficiency and optimize tax revenues to ensure fiscal sustainability. Geopolitical tensions, Cormann warned, could reduce investments and raise import prices, dampening global growth prospects.
