Saudi Arabia's economy is expected to accelerate sharply in 2027 after a subdued performance this year, with Riyad Capital forecasting real GDP growth of 6.8% next year compared with 0.9% in 2026, driven by a recovery in oil production and continued expansion of non-oil sectors.

The outlook, published in Riyad Capital's Second Quarter 2026 Saudi Economic Chartbook, points to a significant turnaround for the Kingdom following a year marked by lower oil output and disruptions to regional energy exports. The investment bank's baseline scenario assumes a gradual reopening of Strait of Hormuz oil routes from September 2026, with Saudi crude production returning to earlier levels by the same month following disruptions linked to the US-Iran war.

The report was prepared by Riyad Capital Chief Investment Officer Hans Peter Huber. 

According to the report, Saudi Arabia's oil sector is expected to contract by 3.6% in 2026 before rebounding strongly with growth of 14.3% in 2027. Non-oil activities, meanwhile, are forecast to expand by 3.0% this year and strengthen further to 4.7% next year, underlining the continued resilience of the Kingdom's diversification efforts under Vision 2030. Government activities are projected to grow by 1.5% in 2026 and 1.3% in 2027.

The expected rebound in oil activity is underpinned by a projected increase in Saudi crude production to 10.4 million barrels per day in 2027 from 9.1 million barrels per day in 2026. Riyad Capital expects the recovery in production to more than offset the impact of lower oil prices next year. Brent crude is forecast to average $75 per barrel in 2027, compared with $86 per barrel in 2026, while the OPEC basket price is also projected at $75 per barrel.

Despite the stronger contribution from hydrocarbons, the report suggests the non-oil economy will remain a key pillar of growth. The projected 4.7% expansion in non-oil activities in 2027 would continue to outpace overall global economic growth and reflects ongoing investment across sectors including tourism, logistics, manufacturing, technology and services.

Trade surplus

The Kingdom's external position is also expected to remain robust. Riyad Capital forecasts a trade surplus of SAR455 billion in 2026 and SAR410 billion in 2027, equivalent to 8.8% and 7.6% of GDP respectively. However, the current account is projected to remain in deficit, albeit improving to 0.7% of GDP in 2026 before widening again to 1.5% in 2027.

On the fiscal front, Saudi Arabia is expected to continue running budget deficits as it pursues major development and investment programmes. The fiscal deficit is forecast at SAR228 billion, or 4.4% of GDP, in 2026 before narrowing to SAR189 billion, or 3.5% of GDP, in 2027. Government debt is projected to rise from SAR1.75 trillion in 2026 to SAR1.94 trillion in 2027, representing 35.9% of GDP.

Inflation is expected to remain contained throughout the forecast period, averaging 2.1% in 2026 and easing slightly to 2.0% in 2027. Riyad Capital also expects monetary conditions to become more supportive, with the three-month SAIBOR falling from 4.75% in 2026 to 4.25% in 2027 as interest rates continue to trend lower.

Unemployment to fall

Labour market conditions are forecast to improve further. Total unemployment is projected at 3.2% in 2026 before declining to 3.0% in 2027, while Saudi unemployment is expected to edge down from 7.1% to 6.9% over the same period.

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