Saudi Arabia is projected to maintain strong economic momentum, with GDP growth expected to reach 4.5 percent in 2026, exceeding the anticipated global average of 3.4 percent, according to recent research from Standard Chartered Global Research (SC Global Research). This positive outlook is largely attributed to a resurgence in the oil sector following the easing of OPEC+ production cuts, coupled with continued expansion in the non-oil economy. The report highlights the Kingdom’s resilience amidst global economic uncertainties.
The forecast, released in SC Global Research’s latest Global Focus report, indicates that the non-oil sector will contribute significantly to this growth, expanding at a steady rate of 4.5 percent driven by both investment and consumer spending. This diversification is crucial as the global economic landscape shifts and presents new challenges.
Saudi Arabia’s Economic Outlook: Sustained GDP Growth
Mazen Bunyan, CEO of Standard Chartered Saudi Arabia, emphasized the importance of continued non-oil sector growth in ensuring financial stability and diversifying the Kingdom’s economic base. While acknowledging potential downside risks to oil prices, Bunyan believes a robust non-oil sector will mitigate these concerns. This aligns with Saudi Arabia’s Vision 2030 plan, which aims to reduce reliance on hydrocarbons.
However, the report also cautions that increasing leverage across sectors could pose risks to future growth. SC Global Research anticipates twin deficits between 2026 and 2028, leading to a rise in the Kingdom’s public debt-to-GDP ratio. This ratio is expected to increase to 36 percent by the end of 2026, approaching the self-imposed ceiling of 40 percent.
Fiscal Policy and Investment
Despite the projected increase in debt, SC Global Research views recent fiscal deficits as a necessary component of broader structural macroeconomic transformation. Policymakers are expected to prioritize diversifying funding sources, actively seeking greater foreign direct investment (FDI) and increased participation from foreign investors in the domestic debt markets.
Increased capital flows are anticipated to bolster the Kingdom’s capital market performance, particularly through greater inclusion in major global investment indices. This would enhance liquidity and attract a wider range of investors, further supporting economic expansion.
Meanwhile, the global economic picture is also evolving. SC Global Research has revised its economic forecast for the United States upward to 2.3 percent for 2026, citing strong business investment fueled by corporate tax cuts and the rapid adoption of artificial intelligence (AI). A recovery in the US labor market is also expected in the second half of 2026.
China’s growth forecast has also been adjusted upwards, now projected at 4.6 percent for 2026, an increase from the previous estimate of 4.3 percent. The report notes that concerns about the impact of US trade policy on Chinese exports have not materialized to the extent initially feared. Export growth is expected to moderate as initial surges subside, but a recent trade truce between the US and China, along with export market diversification, should provide continued support.
In contrast, the Euro-area’s growth prospects remain subdued, with a revised forecast of 1.1 percent for 2026. This modest increase is attributed to carryover effects, but the region faces headwinds from US tariffs and increasing competition from China. Growth across Euro-area economies is also uneven.
Asia’s growth is expected to slow in 2026 compared to 2025, as the benefits of front-loading exports to the US diminish. Political uncertainties in countries like Thailand and the Philippines could further weigh on growth in the region. This shift highlights the interconnectedness of global economies and the impact of external factors.
Madhur Jha, Global Economist & Head, Thematic Research at Standard Chartered, underscored the presence of significant risks to the 2026 growth outlook. These risks stem from geopolitical tensions, including upcoming elections, ongoing conflicts, and the emergence of alliances challenging the existing global order.
However, Jha also pointed to potential upside risks, particularly related to AI-driven productivity gains. These gains could accelerate growth not only in the US and China but also on a global scale. While further tariff reductions are unlikely, the diversification of trade partners could help maintain resilience in global trade.
Looking ahead, the focus will be on how Saudi Arabia navigates the potential risks to oil prices while continuing to implement its diversification strategy. Monitoring the Kingdom’s progress in attracting FDI and managing its debt levels will be crucial. Further updates to the global economic outlook and the performance of major economies will also be important indicators of the overall health of the global financial system.
