Economic and Political Overview

flag Saudi Arabia Saudi Arabia: Economic and Political Overview

In this page: Economic Outline | Political Outline

 

Economic Outline

Economic Overview

Saudi Arabia is the largest economy in the Middle East and the richest Arab country. The policy of large-scale public works undertaken by the authorities, as well as foreign direct investment and the soundness of the banking and financial system, have enabled the country to become the number one regional economy and one of the largest in the world. However, the economy of Saudi Arabia is almost entirely based on oil, with GDP growth being closely linked to real oil growth. After a recession in 223 (-0.8% of GDP) due to oil production cuts and lower oil prices, the kingdom returned to growth in 2024, with real GDP increasing 1.3% compared to the previous year, according to preliminary government data. Non-oil growth significantly outpaced overall GDP, rising by 4.3%, while oil activities declined by 4.5% and government activities grew by 2.6%. According to the IMF, overall GDP growth is projected to accelerate to 4.7% in 2025, assuming the 1 mbpd voluntary oil production cuts are gradually phased out from October 2024 to September 2025, with an average growth of 3.7% per year thereafter.

Concerning public finances, the 2024 budget deficit was officially estimated at 2.8% of GDP, up from 2% in 2023, as spending growth outpaced revenue growth, which was constrained by lower oil production in line with Opec+ commitments. In the 2025 state budget, authorities forecast a fiscal deficit of SAR 101 billion (USD 26.88 billion), as the kingdom continues spending on large-scale gigaprojects to diversify its economy away from oil. The deficit aligns with a preliminary government projection from September, representing about 2.3% of GDP. Fitch projects government debt to rise to 35.3% of GDP by the end of 2026, up from 29.8% at the end of 2024. Government deposits at the Saudi Central Bank (SAMA), including the current account and fiscal reserve, were estimated at 10.3% of GDP at the end of 2024. Contingent liabilities are rising as government-related entities (GRE), particularly the Public Investment Fund (PIF), increase borrowing, but remain small relative to GRE assets (PIF debt was 4.4% of its assets at the end of Q3 2024). Saudi Arabia's inflation in 2024 increased to 1.7% compared to the previous year, according to data from the General Authority for Statistics (GASTAT). The cost-of-living index stood at 111.30 points in 2024, based on the 2018 reference year, up from 109.45 points in 2023.

The standard of living in Saudi Arabia is one of the highest in the Middle East, with a GDP per capita (PPP) of USD 65,885 (IMF, 2024). According to the latest data available from the Saudi General Authority for Statistics,  unemployment among Saudis stood at 7.8% as of the third quarter of 2024, while the overall unemployment rate stood at 3.7%. The unemployment rate hit historic lows, with women’s labour force participation remaining well above the 30% target for 2030.

 
Main Indicators 2023 (E)2024 (E)2025 (E)2026 (E)2027 (E)
GDP (billions USD) 1,067.581,100.711,136.581,199.161,262.33
GDP (Constant Prices, Annual % Change) -0.81.53.34.13.6
GDP per Capita (USD) 32,53032,88133,28734,43135,534
General Government Gross Debt (in % of GDP) 26.228.330.631.933.1
Inflation Rate (%) 2.31.71.92.02.0
Unemployment Rate (% of the Labour Force) 3.80.00.00.00.0
Current Account (billions USD) 34.074.25-20.74-22.56-28.84
Current Account (in % of GDP) 3.20.4-1.8-1.9-2.3

Source: IMF – World Economic Outlook Database, Latest data available.

Note : (E) Estimated data

 

Main Sectors of Industry

Agriculture accounts for 2.7% of Saudi Arabia’s GDP and employs 3% of the active population (World Bank, latest data available). Because of geographical and climatic constraints (droughts), Saudi Arabia imports most of its agricultural and food product requirements. Water scarcity is a serious regional problem that the country is likely to face in the coming years, as the growing cultivation of wheat presents the threat of water depletion. Saudi Arabia is the largest market for agriculture in the GCC region; however, productivity remains limited compared with the public investment that funds the sector. According to Saudi Agriculture, the agricultural contribution to GDP amounted to about USD 31 billion in 2024.

The industrial sector represents 47% of the GDP and employs 16% of the workforce. It is dominated by non-manufacturing activities (oil drilling). The country has the largest oil reserves in the world and is also the largest producer and exporter of oil. Oil accounts for nearly 90% of exports and 70% of government revenues (and more than 40% of GDP). The share of the non-oil industrial sector has been increasing along with the economic diversification efforts of the Saudi authorities (although manufacturing currently represents only 15% of GDP). According to the General Authority for Statistics, the industrial production index rose by 2.1% year-on-year in December 2024, driven by growth in manufacturing activity and waste management services.

Lastly, services represent 44.9% of the GDP and employ 81% of the active population. This sector is mainly dominated by tourism, financial and banking services, and the insurance sector. Tourism generates very high revenues, thanks in particular to the Hajj, the pilgrimage to Mecca that takes place in the last month of the Islamic year, which all Muslims are expected to make at least once during their lifetime. In the first eight to nine months of 2024, Saudi Arabia ranked third globally for international tourist arrival growth, with over 61% (UN Tourism). Overall, the Kingdom recorded 30 million international arrivals in 2024, a new record, significantly up from 17.5 million visitors in 2019 when it first opened to international tourism. The Saudi government launched the “Financial Sector Development Program” as part of “Vision 2030”, aimed at enabling financial institutions to support the growth of the private sector, develop an advanced capital market and improve financial planning. Despite facing tighter liquidity, Saudi banks maintain healthy performance metrics: according to Fitch Ratings, strong gains in securities and trading boosted non-interest income for Saudi banks by SAR 1.4 billion in Q3 2024, driving a SAR 0.5 billion increase in combined profit to reach SAR 20 billion.

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 2.7 20.0 77.3
Value Added (in % of GDP) 2.4 53.3 39.2
Value Added (Annual % Change) 3.9 12.8 4.3

Source: World Bank, Latest data available.

 

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Indicator of Economic Freedom

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.

Score:
66/100
World Rank:
63
Regional Rank:
5



 

Business environment ranking

Definition:

The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.

Score:
6.71/10
World Rank:
42/82

Source: The Economist Intelligence Unit - Business Environment Rankings 2021-2025

 

Country Risk

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Political Outline

Current Political Leaders
King: SALMAN bin Abd al-Aziz Al Saud (since 23 January 2015) - hereditary; the monarch is both chief of state and head of government
Crown Prince and Prime Minister: MUHAMMAD BIN SALMAN bin Abd al-Aziz Al Saud (since 27 September 2022)
Next Election Dates
None; the monarchy is hereditary
Current Political Context
Saudi King Salman bin Abdulaziz Al Saud has appointed Crown Prince Mohammed bin Salman Al Saud as prime minister in September 2022, a post historically held by the ruling monarch. The move, which came as part of a wider cabinet reshuffle, confirmed the growing power of Crown Prince Mohammed bin Salman Al Saud amid the transfer of further responsibilities from the King to his son. The transition of power is now well underway as is Mohammed bin Salman Al Saud's programme to modernise and diversify the economy. His position as prime minister formally makes him head of government, but he is already serving as the de facto ruler of Saudi Arabia as he oversees crucial economic and defence portfolios. He will likely consolidate his power even further before succeeding his father as King.
Saudi Arabia may have difficulties preserving stability in 2025 as the regional and international environment changes. The fall of the Assad government in Syria towards the end of 2024 would reduce Iranian power and create chances for Saudi participation in reconstruction, but it might also increase instability and security threats from extremist organizations. Furthermore, Israel's opposition to a Palestinian state continues to stand in the way of mending bilateral ties and could exacerbate tensions at home because of the broad sympathy for the Palestinian cause.
Main Political Parties
There are no political parties. However, certain political movements may exist (Islamists, Communists, Liberals, Greens, etc.), in the form of illegal organizations. The first municipal elections in Saudi Arabia took place in 2005.
Type of State
Saudi Arabia is an absolute monarchy in which the King has supreme powers.
Executive Power
The King is both the Chief of State and the head of the Government. The monarchy is hereditary. The Council of Ministers (cabinet) is appointed by the Monarch and includes many royal family members. The Council of Ministers does exercise both executive and legislative functions, but the legislative power is heavily tied to the King's authority and Islamic law. All decisions and regulations issued by the Council require the King’s approval to be enacted.
Legislative Power
There is no elected legislature in Saudi Arabia at the national level (although there are municipal elections). A Consultative Council was appointed in August 1993 which has 150 members and a chairman appointed by the King for four-year terms. This Council has limited powers and does not affect decision making or power structures in a concrete way.
 

Indicator of Freedom of the Press

Definition:

The world rankings, published annually, measures violations of press freedom worldwide. It reflects the degree of freedom enjoyed by journalists, the media and digital citizens of each country and the means used by states to respect and uphold this freedom. Finally, a note and a position are assigned to each country. To compile this index, Reporters Without Borders (RWB) prepared a questionnaire incorporating the main criteria (44 in total) to assess the situation of press freedom in a given country. This questionnaire was sent to partner organisations,150 RWB correspondents, journalists, researchers, jurists and human rights activists. It includes every kind of direct attacks against journalists and digital citizens (murders, imprisonment, assault, threats, etc.) or against the media (censorship, confiscation, searches and harassment etc.).

World Rank:
170/180
 

Indicator of Political Freedom

Definition:

The Indicator of Political Freedom provides an annual evaluation of the state of freedom in a country as experienced by individuals. The survey measures freedom according to two broad categories: political rights and civil liberties. The ratings process is based on a checklist of 10 political rights questions (on Electoral Process, Political Pluralism and Participation, Functioning of Government) and 15 civil liberties questions (on Freedom of Expression, Belief, Associational and Organizational Rights, Rule of Law, Personal Autonomy and Individual Rights). Scores are awarded to each of these questions on a scale of 0 to 4, where a score of 0 represents the smallest degree and 4 the greatest degree of rights or liberties present. The total score awarded to the political rights and civil liberties checklist determines the political rights and civil liberties rating. Each rating of 1 through 7, with 1 representing the highest and 7 the lowest level of freedom, corresponds to a range of total scores.

Ranking:
Not Free
Political Freedom:
7/7
Civil Liberties:
7/7

Political freedom in the world (interactive map)
Source: Freedom in the World Report, Freedom House

 

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Latest Update: February 2025