RIYADH: Barclays confirmed to Al-Eqtisadiah that fiscal discipline is supporting the Saudi economy, as this year’s budget targets a 2 percent cut in government spending and a reduction in the budget deficit, prompting the bank to strengthen its outlook on the Saudi economy and improve its performance forecasts.
The more positive outlook was driven by the easing of risks that had previously surrounded oil production, which had a positive impact on growth prospects and the sustainability of the Saudi economy in the coming period, according to what the bank confirmed to Al-Eqtisadiah.
The bank’s Middle East and North Africa analyst James Swanston said this revision is supported by a number of positive developments, foremost among them Saudi Arabia’s success in utilizing the East-West pipeline to ensure the continuity of oil flows.
These developments have bolstered confidence in the stability of oil supplies and reduced the scale of the decline in production.
Regarding geopolitical developments and their impact on public finances, Swanston noted that the ability of Gulf economies to continue government spending varies depending on their degree of dependence on the Strait of Hormuz, pointing out that countries more reliant on it, such as Kuwait, Qatar, and Bahrain, could face greater pressure on oil revenues compared to others.
He said this could push Kuwait and Qatar toward adopting a more conservative approach to fiscal expansion, while for Bahrain it reinforces the importance of continuing fiscal consolidation measures to preserve the sustainability of public finances, given that public debt rose to 148 percent of GDP in 2025.
Swanston pointed out that Saudi Arabia, the UAE, and Oman appear to be in a more flexible position, thanks to their lower level of dependence on the strait and the availability of alternative oil export routes, which gives them greater capacity to continue pursuing balanced fiscal policies.
Barclays affirmed the need to continue strengthening fiscal balance by improving spending efficiency and developing non-oil revenues, including increasing the contribution of non-oil taxes and fees, in a way that supports the strength of public finances over the long term.
