The International Monetary Fund (IMF) increased its 2025 GDP growth prediction for Saudi Arabia from 3% to 3.5%, citing the need for government-led projects and the OPEC+ group’s intention to gradually phase out oil production cuts as contributing factors. The Kingdom is expected to report a fiscal deficit of about USD 27 billion in 2025 as a result of lower oil prices, which have affected the Kingdom’s revenue.
However, to wean the economy off its reliance on oil, the Kingdom has proceeded with spending on a massive economic transformation programme called Vision 2030. In recent years, Saudi Arabia has made significant investments in entertainment, sports, and travel under the programme. Even though oil prices have dropped, growth is anticipated to be fuelled by domestic demand and government spending.
“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.
A major drop in oil revenue prompted Saudi Arabia to “take stock” of its spending priorities, according to Saudi Finance Minister Mohammed Al-Jadaan, as reported in a May Financial Times story.
The Kingdom is nevertheless dedicated to hosting a number of major international events, each of which necessitates substantial investment in planning and building.
The 2029 Asian Winter Games, which will have artificial snow and a man-made freshwater lake, and the 2034 World Cup, which will see the construction of 11 new stadiums and the renovation of others, are two examples.
According to the IMF report, borrowing will be used to cover the majority of the Kingdom’s fiscal deficit. Saudi Arabia was the biggest issuer of dollar debt for emerging markets in 2024, but the Kingdom has room to borrow more because, according to the IMF, its net debt is only about 17% of GDP, making it one of the least indebted countries in the world.
Meanwhile, the Saudi General Authority for Statistics reported that Foreign Direct Investment (FDI) inflows reached SAR 22.2 billion (USD 5.9 billion) in Q1 2025, while the unemployment rate declined to 7.8%.
The data indicated a 44% increase in FDI inflows compared to the same period in 2024, when it amounted to SAR 15.5 billion (USD 4.1 billion), despite a 7% decline compared to the fourth quarter of 2024, which recorded SAR 23.9 billion (USD 6.4 billion). FDI inflows into the Kingdom totalled SAR 24.0 billion (USD 6.4 billion) in Q1 2025, reflecting a 24% year-on-year increase but a 6% drop compared to Q4 2024.
In the labour market, the data showed a decline in the overall unemployment rate for individuals aged 15 and older to 7.8% in Q1 2025, compared to 8.5% in Q4 2024, 3.7% for males, and 18.4% for females. The Authority reported Saudi unemployment falling to 7.6%, down from 8.4%, with male unemployment sliding from 5.1% to 4.7% and female unemployment easing from 14.3% to 13%.
The labour force participation rate for Saudis stood at 47.6%, with 66.6% for males and 35.4% for females, while the employment-to-population ratio was 92.4%. The data showed that the majority of Saudi job seekers are in the 20-29 age group, with the highest numbers in Riyadh, Makkah, the Eastern Province, Aseer, and Qassim.