Saudi Arabia revises Q1 GDP upward amid oil price pressures

Saudi Arabia’s economy grew faster than initially expected in the first quarter of 2025, with revised government figures showing a 3.4% year-on-year increase in GDP — up from the earlier forecast of 2.7% published in May by the Saudi General Authority for Statistics.

According to analysts, the upward revision was largely due to a milder contraction in the oil sector and stronger-than-expected growth in the private, non-oil economy.

“The smaller drop in oil GDP combined with robust private sector expansion drove the improvement,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank. 

The oil sector contracted by just 0.5%, as opposed to the 1.4% decline previously projected. Meanwhile, non-oil GDP climbed 4.9%, exceeding the earlier estimate of 4.2%.

Saudi Arabia, the world’s leading oil exporter, appears to have softened the blow of lower oil prices through increased crude output. Nevertheless, the kingdom faces a growing budget shortfall. 

The International Monetary Fund (IMF) estimates that Saudi Arabia needs oil prices above $90 per barrel to balance its budget — significantly higher than the recent market prices hovering around $60 per barrel.

In early June, Saudi Arabia cut its July oil prices for Asian buyers, shortly after the OPEC+ alliance agreed to raise production for a fourth consecutive month. July’s output is expected to increase by 411,000 barrels per day, matching the hikes in May and June.

This economic backdrop unfolds as the Kingdom pushes forward with Vision 2030, its ambitious plan to diversify away from oil dependency. The program includes massive development projects requiring billions in investment. However, lower oil revenue is now prompting policymakers to reassess spending priorities.

Finance Minister Mohammed Al-Jadaan recently told the Financial Times that the government would “take stock” of spending in light of reduced oil income. Some economists believe this will translate into restrained expenditure growth.

“We anticipate some scaling back of public spending to contain the fiscal deficit, which could temper non-oil sector momentum,” Malik added.

Still, others maintain a more optimistic outlook. Daniel Richards, senior economist at Emirates NBD, believes that project spending already in motion will sustain growth through 2025 and beyond. “There’s enough investment already committed to ensure continued economic support,” he noted.

Saudi Arabia is also ramping up preparations for major global events, including the 2029 Asian Winter Games — featuring artificial snow and a man-made lake — and the 2034 FIFA World Cup, which will involve constructing 11 new stadiums and renovating several others.

The Kingdom’s 2025 budget deficit is projected at around 101 billion riyals ($27 billion), underscoring the challenge of financing growth while oil revenues remain volatile.