Saudi Arabia's Economy Grows Faster Than Expected in Q1

Post by : Bianca Suleiman

Photo: Reuters

Saudi Arabia’s economy grew faster than experts thought in the first three months of 2025. According to new government numbers, the country’s economy increased by 3.4% compared to the same time last year. This was better than earlier predictions made in May, which had guessed only 2.7% growth.

One big reason for the better growth was that the oil sector didn’t shrink as much as expected. Earlier, it was believed that oil-related parts of the economy would go down by 1.4%, but they only dropped by 0.5%. At the same time, the parts of the economy not related to oil, known as the non-oil sector, grew by 4.9%. This was higher than the earlier estimate of 4.2%.

Even though oil prices have gone down in recent weeks, Saudi Arabia increased its oil output, which helped lessen the damage from lower prices. But the country still has a problem: a growing budget deficit. The International Monetary Fund (IMF) says Saudi Arabia needs oil prices to be over $90 per barrel to avoid losing money. But oil has recently been selling for only around $60 per barrel.

In early June, Saudi Arabia reduced oil prices for Asian buyers. This came after a group called OPEC+, which includes Saudi Arabia and other oil-producing countries, agreed to raise oil production. They are increasing production by 411,000 barrels per day in May, June, and again in July.

Saudi Arabia is also working on a big and expensive plan called Vision 2030. The goal is to reduce the country’s dependence on oil by building new industries, tourism, and big construction projects. This includes hosting major international events like the 2029 Asian Winter Games and the 2034 FIFA World Cup. For these events, they are building new stadiums, man-made snow parks, and even a freshwater lake.

Still, the country is spending a lot of money. The Finance Minister, Mohammed Al-Jadaan, said the government will look at what it's spending and may make some changes because of the drop in oil income. Experts like Monica Malik, a top economist, said the government might need to slow down some spending, which could affect non-oil growth in the future.

But not everyone agrees. Daniel Richards, a senior economist, believes that because there are already many big projects happening, the economy will stay strong this year and into the next.

Saudi Arabia’s budget deficit for 2025 is expected to be around 101 billion riyals, which equals about $27 billion.