The International Monetary Fund on Thursday raised its 2025 GDP growth forecast for Saudi Arabia to 3.5% from 3%, partly on the back of demand for government-led projects, and supported by the OPEC+ group’s plan to phase out oil production cuts.
Lower oil prices have weighed on Saudi Arabia’s revenue, with the kingdom projected to post a fiscal deficit of around $27 billion this year.
Still, the kingdom has pushed forward with spending on a massive economic transformation program known as Vision 2030 that aims to wean the economy off its dependence on oil.
Under the program, Saudi Arabia has invested heavily in sports, tourism, and entertainment in recent years.
Government spending and domestic demand are expected to fuel growth despite lower oil prices.
“Robust domestic demand – including from government-led projects – will continue to drive growth despite heightened global uncertainty and a weakened commodity price outlook,” said the IMF report.
Saudi Finance Minister Mohammed Al-Jadaan said the kingdom would “take stock” of its spending priorities in response to a significant decline in oil revenue, the Financial Times reported in May.
Still, the kingdom is committed to hosting several large international events, each of which requires significant spending on construction and development.
These include the 2029 Asian Winter Games, set to feature artificial snow and a man-made freshwater lake, and the 2034 World Cup, for which 11 new stadiums will be built and others renovated.
The kingdom’s fiscal deficit will largely be financed by borrowing, said the IMF report.
Saudi Arabia was the largest emerging market dollar debt issuer last year, but the kingdom has room to continue borrowing, with its net debt around 17% of GDP, making it one of the least indebted nations globally, according to the IMF.
The IMF had lowered the kingdom’s GDP growth forecast to 3% in April from an initial January estimate of 3.3%.
The fund on Thursday added that non-oil real GDP growth is projected at 3.4% in 2025, about 0.8% lower than last year.
(Reporting by Pesha Magid; Editing by Jan Harvey)
