Forecast The World Bank expects the Saudi economy to continue its recovery following a slowdown in 2023, noting a gradual improvement in growth rates thanks to economic diversification reforms and anticipated changes in oil production, while expressing optimism about the prospects for the economies of the Gulf Cooperation Council (GCC) countries, which are poised to achieve strong growth in the medium term.
This was stated in the latest edition of the World Bank’s report on “Economic Developments in the Gulf Cooperation Council (GCC) Countries,” released today, Thursday, titled “Smart Spending and Stronger Economic Outcomes: Public Finance Policies for GCC Prosperity.”
Accelerated Growth for Saudi Arabia, Supported by Diversification and Production Liberalization
According to the report, the growth rate of the Saudi economy is expected to rise to 2.8% in 2025, after having declined to 1.3% in 2023, with average growth reaching 4.6% between 2026 and 2027.
The bank noted that the gradual phasing out of voluntary production cuts by “OPEC+” will help boost oil-related GDP, which is projected to rise by 6.7% in 2026, followed by 6.1% in 2027.
At the same time, non-oil GDP is expected to continue growing at a steady pace, averaging 3.6% during the period from 2025 to 2027, as the Kingdom continues to implement economic diversification programs under Saudi Vision 2030.
Notable improvement in Gulf countries" performance… Non-oil growth leads the recovery
As for the Gulf Cooperation Council (GCC) countries as a whole, the World Bank projected that the economic growth rate would reach 3.2% in 2025, rising to 4.5% in 2026, driven by the lifting of oil production restrictions and the expansion of non-oil sectors.
Gulf economies grew by 1.7% in 2024, compared to just 0.3% in 2023, supported by private consumption, increased investment, and structural reforms. The non-oil sector also showed remarkable resilience, achieving growth of 3.7%.
Warnings of a Global Economic Slowdown… and Calls for Reform
Despite the general optimism, the report warned of potential challenges stemming from uncertainty in the global economy, particularly regarding international trade, which could cast a shadow over the economic performance of Gulf countries.
To mitigate these risks, the World Bank emphasized the importance of accelerating economic diversification reforms and strengthening regional trade, while supporting innovation, entrepreneurship, and the creation of sustainable jobs.
Smart Policies Drive Long-Term Prosperity
Commenting on the report’s findings, Safaa Al-Tayeb Al-Kouqali, the World Bank’s Regional Director for the Gulf States, affirmed that the countries of the region have demonstrated a high degree of resilience in the face of global challenges, noting that strategic policies focused on supporting public finances and targeted investment enhance opportunities for growth and stability.
She added that a focus on innovation and job creation for young people is a key element in sustaining this growth in the coming years.
The Effectiveness of Fiscal Policies Under Scrutiny
The report examined in depth the role of fiscal policy in macroeconomic stability, particularly in light of oil price volatility, which continues to place significant pressure on the budgets of some Gulf countries.
It noted that some countries are expected to record growing budget deficits in 2025, highlighting the importance of developing more efficient tools for government spending.
The bank’s analysis showed that a one-unit increase in government spending leads to non-oil GDP growth ranging between 0.1 and 0.45 units. He also noted that the impact of government investment on non-oil GDP is marginal, as a one-percentage-point increase in investment leads to an increase of only 0.07% in potential output.
