Saudi Arabia’s economy to expand by 3.7% in 2025: Mastercard Economics Institute
Kingdom’s robust growth in the non-oil sector signifies the nation’s steadily progressing economic diversification journey
Tourism sector is expected to remain a bright spot for the economies in the GCC region
Updated 17 December 2024
Nirmal Narayanan
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.
RIYADH: Global investors can find a “safe harbor” in the Gulf Cooperation Council as the bloc’s public-private partnerships pipeline offers “compelling” opportunities, according to a new report.
The latest document from the Future Investment Initiative Institute highlights how economies in the region are currently driving the next wave of PPP growth.
It cites findings from Partnerships Bulletin, which ranks Saudi Arabia as second in the global emerging markets pipeline for PPP projects up to July 2025, and also places Dubai in the top 10.
While that analysis claims the Kingdom has 98 PPP projects either formally published or announced, FII says Saudi Arabia has a further 200 currently awaiting approval.
The findings align with the goals outlined in the Kingdom’s National Privatization Strategy, launched in January, which aims to raise satisfaction levels with public services across 18 target sectors, create tens of thousands of specialized jobs, and exceed 220 PPP contracts by 2030.
The strategy also aims to increase private sector capital investments to more than SR240 billion ($63.99 billion) by 2030.
The FII report says that around 90 percent of FDI into Saudi Arabia now flows into non-oil sectors, from advanced manufacturing and tourism to green energy and digital infrastructure.
“That shift reflects deliberate policy choices to open markets, standardize regulatory frameworks and use public capital to de-risk new value chains,” says the document, adding: “The result is a kind of safe harbor in an otherwise low-growth, high-uncertainty world.”
It continues: “While global FDI has stagnated or declined in many regions, the GCC’s pipeline of planned infrastructure and industrial projects now exceeds $2.5 trillion, according to Boston Consulting Group data, with PPPs playing a central role in structuring and financing them. For global investors searching for yield, diversification and inflation-linked income, this represents a compelling proposition.”
Commenting on the FII Institute report, Sally Menassa, partner at international management consulting firm Arthur D. Little, said PPPs are a strategic necessity for delivering infrastructure at speed and scale, and described Saudi Arabia’s pipeline as a “powerful execution and financing tool.”
She added: “The Kingdom’s PPP momentum must remain focused on impact, value creation and execution excellence. PPPs should not be viewed merely as a funding mechanism, but as a structural tool to enhance infrastructure performance, attract investment and support sustainable economic growth in line with Vision 2030.”
Menassa said that Saudi Arabia’s National Privitization Strategy marks a shift from a project-by-project approach to institutionalization of efforts and value creation.
“By clarifying sector priorities, strengthening project selection criteria, and formalizing governance and investor pathways, the Strategy reduces uncertainty. This clarity enhances investor confidence and improves pipeline quality,” said the Arthur D. Little official.
Sally Menassa, partner at international management consulting firm Arthur D. Little. Supplied.
She added: “PPP and privatization efforts in Saudi Arabia are not about divestment or the state shifting execution to the private sector, it is really about becoming more productive as a nation. It enhances efficiency, raises service standards, mobilizes private and SME participation, and attracts capital.”
Menassa further said that the strategy could help the Kingdom achieve stronger fiscal sustainability and higher private sector GDP contribution, both of which are critical components to accelerate the Kingdom’s economic transformation under Vision 2030.
Vijay Valecha, chief investment officer at Century Financial, believes input from the private sector across all stages, from design to construction and operations, improves the efficiency of project delivery and long-term operations in Saudi Arabia.
“Tighter governance through centralized management at the National Center for Privatization and PPP and a more streamlined process, including template contracts, a clearer regulatory environment, and a transparent pipeline, is likely to improve delivery speed,” said Valecha.
He added: “This means faster delivery of big projects like Red Sea resorts or Neom, with private firms handling operations to drive innovation. Ultimately, the strategy supercharges diversification by making the private sector the main engine of growth, aligning perfectly with Saudi Arabia’s push for a vibrant, non-oil economy.”
The FII Institute added that the global flow of FDI is increasingly concentrated in the Gulf Cooperation Council region, driven by ambitious national transformation agendas and deep pools of sovereign wealth.
Tony Hallside, CEO of STP Partners, outlined several factors that are boosting the PPP landscape in the region, which include large infrastructure demand from Vision-level programs and urbanization.
“Government frameworks that standardise PPP procurement are making projects bankable. Strong regional capital pools and sovereign support will mitigate risk and attract global players. In the GCC, Saudi Arabia’s pipeline itself is one of the largest in the Middle East, indicating strong investor interest,” added Hallside.
Underscoring the role of growing PPP in Saudi Arabia, the FII report said: “A decade ago, the Kingdom’s solar capacity was negligible, despite its vast solar resource. Through early anchor investments, long-term power purchase agreements and support for national champions, the state seeded a competitive renewables market that now attracts global players on purely commercial terms.”
Valecha said that clearer PPP laws, standardised contracts and dedicated PPP units have reduced execution risks and made projects more bankable for global infrastructure funds and developers in the GCC region.
He added that rapid urbanization, a young and growing population, rising data center power demand and energy transition projects create predictable, long-duration cash flows in the region.
“This combination of policy support, fiscal necessity and structural growth is why the GCC is emerging as one of the fastest-growing PPP markets globally,” said Valecha.
Vijay Valecha, chief investment officer at Century Financial. Supplied
Key Saudi PPP projects
Yanbu 4 Independent Water Project - supplying water to Medina and Makkah
Location Yanbu, Red Sea coast
Companies involved: Engie, Mowah, Nesma, Saudi Water Partnership Co.
Cost: $826.5 million
Expected delivery date: Operational as of 2024
Hadda Independent Sewage Treatment Plant
Location: Makkah Province
Companies involved: Metito Utilities, Etihad Water and Electricity, SkyBridge Limited Co., Saudi Water Partnership Co.
Expected delivery date: 2028
As Sufun Solar PV Independent Power Project
Location: Hail region
Companies involved: TotalEnergies, Aljomaih Energy & Water, Saudi Power Procurement Co.
Expected delivery date: Expected to connect to the grid in 2027
Construction of greenfield international airports
Location: Taif, Abha, Qassim, and Hail
Companies involved: Currently in the planning stage; investors are being sought
One-Stop Station Project
Location: Intercity road network across the Kingdom
Companies involved: Saudi Arabia’s Roads General Authority and National Center for Privatization & Public-Private Partnership announced a full list of qualified bidders in February.
King Salman Park
Location: Riyadh
Companies involved: King Salman Park Foundation, Ajdan Real Estate, Sedco Capital
Cost: $1 billion
Project: Madinah-3, Buraydah-2, and Tabuk-2 Independent Sewage Treatment Plants
Location: Madinah, Buraydah, and Tabuk
Companies involved: Acciona Agua, Tawzea, Tamasuk, Saudi Water Partnership Co.
Cost: $627 million combined
Riyadh Metro Line 2 Extension
Location: Riyadh
Companies involved: Royal Commission for Riyadh City, Arriyadh New Mobility Consortium, led by Webuild. Riyadh Metro Transit Consultants (JV between US Parsons and France’s Egis and Systra) as project management and construction supervision consultant.
Cost: Up to $900 million
Expected delivery date: 2032
The crucial role of emerging markets
According to the FII Institute report, the ability to deliver resilient infrastructure, expand digital connectivity and accelerate the energy transition will increasingly depend on the strength and legitimacy of PPPs, as fiscal space tightens and investment needs rise.
FII estimates a $5 trillion global infrastructure financing gap by 2040. It also points to significant regional shortfalls, including an estimated $3.7 trillion gap in the US and an annual $130 billion to $170 billion gap across Africa. In this context, PPPs are moving from a transactional procurement route to a central model for financing and delivery.
The report highlighted that emerging markets, including Saudi Arabia, are currently driving the next wave of PPP growth, with spending across low-and middle-income countries reaching $100.7 billion in 2024, up 16 percent year on year, according to figures from the World Bank.
Moreover, emerging markets now represent around 61 percent of global PPP activity by gross domestic product share.
According to Partnerships Bulletin’s findings up to July 31 2025, the Philippines leads the emerging-market pipeline with 230 projects, followed by Saudi Arabia with 98, Kyrgyzstan with 80, Bangladesh with 71, and Peru with 54 projects.
Greece has 42 projects in the pipeline, followed by Dubai at 28, Kenya at 25, Colombia at 24, and Pakistan at 14.
PPP: An engine of growth
When capital was cheap, PPPs were often treated as an optional extra – a way to shift specific projects off the public balance sheet, or to import private-sector efficiency into construction and operations, the FII report said.
However, now, nations consider PPPs as a central hub of their economic strategy, as they enable the state to stretch every dollar of public investment using private capital, while retaining strategic control over what gets built, where and to what standard.
“The real differentiator is complexity. When a project presents significant financial uncertainty or unpredictable demand, or if there’s a high level of climate exposure or technological risk, a PPP can give leaders the tools to manage those issues without slowing things down,” said Bob Willen, global managing partner and chairman of Kearney, said in the FII report.
Erik Ringvold, chief business development officer at Regional Voluntary Carbon Market Co., was quoted in the report as saying that carbon markets will benefit through PPPs, as deepened public-private partnerships could help achieve progress toward national emissions targets, while simultaneously creating economic opportunity and catalyzing new green industries.
“Saudi Arabia has made large strides toward an emissions compliance system, with an operational carbon standard in place, and an emissions trading system announced to be launched over the coming few years,” said Ringvold.
He added: “At VCM, we see a clear future carbon vision for Saudi Arabia. One ecosystem. One marketplace. One iconic collaboration – with the PPP model at the heart of its success.”
PPPs for investors and citizens
For investors, infrastructure-backed PPPs offer long-duration, often inflation-linked cash flows at a time when public markets are volatile and dominated by a narrow set of mega-cap technology stocks.
For citizens, well-designed PPPs can mean better services, more resilient infrastructure and faster progress toward climate and development goals, without unsustainable tax rises or austerity.
FII, however, cautioned that public consent is becoming decisive. Across seven countries, only 23 percent of citizens agree that PPPs “equally benefit everyone”, compared with 41 percent of business and government leaders.
Tony Hallside, CEO of STP Partners. Supplied
Hallside said that public consent hinges on transparency, accountability, and visible service outcomes.
He added that governments should publish clear procurement frameworks, communicate cost-benefit and performance expectations in plain language, and measure user satisfaction and service quality over time — “reinforcing that PPPs deliver tangible improvements in infrastructure and services.”
Menassa echoed similar views and said that communication with the public is not sufficient, but the performance and execution phase holds the key to PPP projects.
“Winning public opinion for PPPs is rather a marathon not a race. It starts with building awareness and trust by providing transparency and demonstrating value for money, ensuring affordability and service quality of public services is maintained through strong regulatory oversight, and ensuring competitive, transparent procurement processes,” added Menassa.
According to the Arthur D. Little official, the public must see tangible improvements in service reliability, efficiency and accountability, and acceptance will follow.
“The world can’t afford to delay the infrastructure and energy transition investments that will determine prosperity – and planetary stability – for decades to come. Nor can it fund them through public budgets alone. Financing the future is, by definition, a joint endeavour,” added the FII report.
