RIYADH: Saudi Arabia’s gross domestic product is expected to grow 3.7 percent in 2025, driven by a rise in the Kingdom’s non-oil activities, according to an analysis. 

In its latest report, Mastercard Economics Institute said Saudi Arabia’s rapid expansion of its GDP will outperform the projected global average, which is estimated at 3.2 percent in 2025. 

The Kingdom’s robust growth in the non-oil sector signifies the nation’s steadily progressing economic diversification journey aimed at reducing reliance on crude revenues. 

According to the analysis, Saudi Arabia’s projected economic growth in 2025 is higher than that of major players, including the US, Germany, and Japan, as well as the UK, France, and Australia. 

“With robust non-oil economic activity and continued investments aligned with Vision 2030, Saudi Arabia is set to maintain its strong growth trajectory, outpacing global markets,” said Khatija Haque, chief economist of Mastercard for the Eastern Europe, Middle East and Africa region. 

She added: “As we move into 2025, a year shaped by evolving fiscal and monetary policies, the Kingdom’s diversification efforts and supportive economic reforms will solidify its position as a key driver of regional economic expansion. These structural shifts will continue to redefine economic landscapes, charting new pathways for sustainable growth.”

In November, a report released by the International Monetary Fund projected that Saudi Arabia’s economy is expected to remain resilient, with the Kingdom’s GDP set to expand by 1.5 percent and 4.6 percent in 2024 and 2025, respectively. 

In September, another study released by credit-rating agency S&P Global said that Saudi Arabia’s GDP will expand by 1.4 percent in 2024 before accelerating to 5.3 percent in 2025. 

The Mastercard analysis revealed economic diversification efforts in the Kingdom will continue in 2025 as the government leverages strong balance sheets to finance investment in infrastructure. 

The report added that private sector investments should also benefit from lower interest rates, supporting employment and domestic consumption. 

Regionally, the tourism sector is expected to remain a bright spot for the economies in the Gulf Cooperation Council region.

“The GCC’s strong push to develop its tourism offerings has positioned it as one of the fastest-growing destinations in the world. In addition, the strength of the region’s US dollar-pegged currencies is fueling the demand for outbound travel,” said Mastercard Economics Institute. 

Steady inflation levels

The Mastercard Economics Institute further projected that Saudi Arabia’s inflation is expected to stay at a healthy level of 2 percent in 2025, while consumer spending in the Kingdom is projected to expand by 4.5 percent. 

Earlier this month, a report released by Saudi Arabia’s General Authority for Statistics revealed that the Kingdom’s annual inflation rate reached 2 percent in November compared to the same month in 2023. 

Saudi Arabia’s inflation rate is one of the lowest in the Middle East region and globally, indicating the Kingdom’s effective measures to stabilize the economy and combat global price pressures. 

In October, the World Bank projected that Saudi Arabia’s inflation level is expected to stay at 2.1 percent in 2024 and 2.3 percent in 2025, lower than the Gulf Cooperation Council average. 

Globally, Mastercard Economics Institute projected that the average inflation level will remain at 3.2 percent next year. 

“Inflation across major economies eased significantly in 2024, underpinned by lower prices of durable goods and reduced inflation for non-durable goods. While upside risks to good prices remain due to tariffs, moderating wage growth is expected to decrease services inflation,” said the report. 

Rising female workforce and population growth

The study highlighted that population growth in the Kingdom also acts as an essential driver for economic activity and, particularly, private consumption. 

According to the analysis, inbound migration into Saudi Arabia has greatly enriched the human capital of the country, with the next inflow of migrants contributing 4.9 percent of the population growth between 2019 and 2023. 

In November, a report released by the BlackRock Investment Institute also echoed similar views, highlighting that Saudi Arabia’s young and growing workforce and abundant natural resources could play a crucial role in determining the Kingdom’s economic growth in the future. 

Mastercard added that the participation of women in Saudi Arabia’s labor force is growing, driven by enabling government policies, increasing job creation in female-dominated sectors, and flexible work arrangements. 

The Kingdom, aligned with Vision 2030 goals, had initially targeted 30 percent of women’s participation in the workforce by the end of this decade. 

Speaking at the Future Investment Initiative in Riyadh in October, Saudi Arabia’s Minister of Finance Mohammed Al-Jadaan said that Saudi Arabia aims to achieve 40 percent female workforce participation by the end of this decade, surpassing its Vision 2030 target of 30 percent. 

“The latest World Bank data shows that women’s representation in the Saudi workforce grew from 18 percent in 2017 to 34.5 percent in 2023. This marked increase is mainly due to the easing of social and other restrictions in the Kingdom in recent years, driven by its ambitious Vision 2030 that seeks to build a thriving economy where everyone has the opportunity to succeed,” said Mastercard Economics Institute. 

It added: “Women’s labor force participation likely reflects the disproportionate job creation in female-dominated sectors, such as health care and education. In addition, the rise of remote work and the flexibility it brings tends to help women, who are often still the primary caregivers, as it makes it easier to raise children while working.” 

Global outlook

According to the analysis, the UAE is expected to witness an economic expansion of 5 percent in 2025, while inflation is set to average 2.5 percent. 

India’s GDP is projected to expand by 6.6 percent next year, while the economy of the US and the UK is expected to grow by 2.3 percent and 1.2 percent, respectively. 

France is expected to witness an economic growth of 0.8 percent in 2025, while the economies of Germany, Italy, and Canada are set to expand by 0.6 percent, 0.7 percent, and 1.8 percent, respectively.