Saudi Arabia’s calculated bet on long-term growth

Saudi Arabia’s fiscal and economic results for 2025 underscore a deliberate strategy: accepting short-term deficits in service of long-term resilience.

The Ministry of Finance reported total revenues of SR1.11 trillion ($296 billion) against expenditures of SR1.38 trillion, resulting in a budget deficit of SR276.6 billion. Rather than signaling imbalance, the deficit reflects a calculated fiscal decision aimed at sustaining development spending and reinforcing growth momentum under Saudi Vision 2030.

The 2025 deficit was financed through diversified debt instruments within a balanced funding framework designed to enhance liquidity management and preserve fiscal sustainability. Total public debt stood at approximately SR1.5 trillion by year-end — a manageable level within the Kingdom’s fiscal strategy. Importantly, around 61 percent of that debt, or SR943 billion, is domestically sourced, reducing exposure to external market volatility and strengthening financial stability.

The General Reserve Balance reached roughly SR399 billion, providing a solid financial buffer. These reserves, combined with disciplined debt management, reflect a counter-cyclical fiscal approach that directs spending toward high-impact development projects while maintaining long-term stability.

Saudi Arabia’s strong sovereign profile further supports this approach. Investment-grade ratings of “A+” (stable outlook) from Fitch Ratings and Standard & Poor’s, along with “Aa3” (stable outlook) from Moody's, provide the Kingdom with favorable access to capital markets. These ratings allow the government to finance investments expected to generate returns that exceed the cost of borrowing, reinforcing fiscal prudence rather than undermining it.

A defining feature of 2025 was the continued expansion of non-oil revenues, which reached SR505 billion. This marks tangible progress toward reducing oil dependency and broadening the fiscal base — a central objective of Vision 2030. The increase reflects stronger performance across non-oil sectors, from manufacturing and logistics to tourism and services.

External trade indicators reinforce this progress. The trade balance recorded a surplus of SR43.6 billion during October and November 2025, compared with SR29.3 billion in the same period of 2024. Over the same months, non-oil exports, including re-exports, surged by about 27 percent year on year to a record SR66.9 billion. These gains suggest that diversification is not merely a policy objective but an increasingly measurable economic reality.

Real GDP expanded by 4.5 percent in 2025 compared to 2024, driven by growth in both oil activities (5.6 percent) and non-oil activities (4.9 percent). Balanced growth across sectors reduces vulnerability to commodity cycles and supports broader economic stability.

Inflation remained contained, with the consumer price index stabilizing at 2 percent. Moderate inflation helped preserve purchasing power, support household spending and ease cost-of-living pressures, contributing to overall economic balance and improved quality of life.

The labor market also delivered encouraging results. In the third quarter of 2025, the number of Saudi nationals employed in the private sector rose by approximately 126,200 workers, representing growth of 5.3 percent year on year and bringing total Saudi private sector employment to about 2.486 million. Continued employment gains are expected to support rising household incomes and strengthen domestic consumption, further enhancing economic resilience.

Meanwhile, micro, small and medium enterprises continued their rapid expansion. The number of such establishments has grown by 291 percent since 2016, reaching approximately 1.7 million by the third quarter of 2025. This expansion reflects the impact of ongoing structural reforms and highlights the sector’s growing role in stimulating non-oil activity, fostering innovation and diversifying the production base.

Spending on social benefits also increased, reaching more than SR99.3 billion by the end of the fourth quarter of 2025. This underscores the government’s continued commitment to strengthening social support mechanisms as part of its broader economic framework.

Taken together, the 2025 fiscal and economic indicators point to a transformation advancing with discipline and intent. Prudent fiscal management, expanding non-oil revenues, stable inflation, improving labor participation and sustained private sector growth collectively reinforce the Kingdom’s trajectory toward diversification and resilience.

In a global environment marked by uncertainty and volatility, Saudi Arabia’s strategy — investing today to secure tomorrow — positions the Kingdom as an increasingly dynamic and diversified economy, capable of sustaining long-term growth while maintaining fiscal stability.

• Talat Zaki Hafiz is an economist and financial analyst.

X: @TalatHafiz