Faster Growth Ahead for Saudi Arabia and MENA Region, Says IMF

Saudi Arabia, the economic powerhouse of the Gulf, is at the heart of this growth story. The IMF’s revised forecast of 3.6% GDP growth for 2025, up 0.6% from its April projection, reflects the Kingdom’s remarkable resilience. This figure outpaces the global average of 3% and surpasses most Gulf neighbors, positioning Saudi Arabia as a standout performer among G20 economies, trailing only India (6.4%) and China (4.8%). Looking further ahead, the IMF projects growth to climb to 3.9% in 2026, stabilizing at around 3.5% in the medium term.

What’s fueling this momentum? The non-oil sector is the star of the show. Growing at a robust 3.4% in 2025 and expected to hit 3.5% in 2026, non-oil GDP is benefiting from strong domestic demand and the Kingdom’s ambitious Vision 2030 initiatives. These reforms, aimed at diversifying the economy away from oil, include massive investments in infrastructure, tourism, and technology. For instance, projects like NEOM and the Red Sea tourism developments are not only creating jobs but also attracting global investors. The IMF highlights that these efforts, combined with strong credit growth, are helping Saudi Arabia weather lower oil prices.

The Kingdom’s oil economy isn’t sitting idle either. The IMF expects oil GDP to grow by 4% in 2025, accelerating to 4.9% in 2026 as OPEC+ production cuts gradually unwind. This balanced growth—non-oil and oil sectors firing on all cylinders—underscores Saudi Arabia’s ability to adapt to global economic shifts while pursuing its diversification goals.

MENA Region on the Rise

The MENA region as a whole is also poised for faster growth, with the IMF forecasting a 3.2% expansion in 2025, a 0.6% increase from its April projection. This upward revision reflects better-than-expected output in key economies like Saudi Arabia and Egypt, alongside improved financial conditions across the region. The IMF projects MENA growth to reach 3.4% in 2026, driven by a combination of structural reforms, increased investment, and a rebound in oil production.

Countries like the United Arab Emirates (UAE) are contributing to this positive outlook. The UAE’s economy, bolstered by its role as a regional hub for trade and investment, is seeing strong private equity and venture capital activity. For example, Saudi Arabia and the UAE together accounted for 86% of MENA’s private equity deals in the first half of 2025, highlighting their dominance in the region’s investment landscape. Meanwhile, nations like Egypt, Jordan, and Morocco are also making strides, though challenges like slower structural reforms and regional conflicts could temper their progress.

Vision 2030: The Engine of Saudi Arabia’s Growth

At the core of Saudi Arabia’s economic success is Vision 2030, a transformative blueprint launched in 2016 to reduce oil dependency and foster a diversified, private-sector-driven economy. The IMF has repeatedly praised the Kingdom’s progress, noting its “unprecedented economic transformation.” Key achievements include:

• Non-Oil Sector Boom: Non-oil GDP grew by 4.5% in 2024, driven by private consumption and investment in sectors like tourism, retail, and construction. The IMF expects this momentum to continue, with non-oil growth projected at 3.4% in 2025 and 3.5% in 2026.

• Record-Low Unemployment: The unemployment rate dropped to a historic low of 7% in Q4 2024, surpassing Vision 2030’s revised target of 5% by 2030. Female labor force participation has soared to 37%, exceeding the original 30% goal, thanks to reforms like transport subsidies and childcare support.

• Business-Friendly Reforms: New laws promoting entrepreneurship and protecting investor rights have led to a 95% increase in investment deals and a 267% surge in licenses in 2022 alone. The Public Investment Fund (PIF) is also playing a pivotal role, deploying capital to stimulate private-sector growth.

These reforms are not just numbers on a page—they’re changing lives. For example, the rise in female workforce participation has empowered Saudi women, with initiatives like employer incentives and digital transformation creating new opportunities. The IMF notes that these structural changes are helping Saudi Arabia build resilience against external shocks, such as fluctuating oil prices or global trade tensions.

Challenges and Risks on the Horizon

While the outlook is bright, it’s not without risks. The IMF warns that downside factors could dampen growth, including weaker global oil demand, regional security tensions, and slower-than-expected progress on reforms. For Saudi Arabia, extended OPEC+ production cuts have been a drag on revenue, with oil prices projected to decline by 13.9% in 2025. The Kingdom needs oil prices near $100 per barrel to balance its budget, but the IMF expects prices to hover around $81 in 2024, posing fiscal challenges.

Geopolitical events, such as conflicts in the MENA region, could also disrupt investor sentiment and trade flows. The IMF highlights that spillovers from regional instability, like the ongoing conflict in Sudan, have already lowered growth projections for some MENA countries. Additionally, global trade tensions, including tariffs announced by former U.S. President Donald Trump, could create uncertainty, though their impact has been mitigated by lower effective tariff rates and front-loaded trade activity.

On the domestic front, rapid investment in Vision 2030 projects could lead to overheating, putting pressure on prices and external accounts. The IMF advises a countercyclical fiscal stance to manage these risks, noting that Saudi Arabia’s ample fiscal buffers and access to international capital markets provide a safety net. The public debt-to-GDP ratio is projected to rise to 29.8% in 2025 and 32.6% in 2026, but the Kingdom’s strong credit rating and investor confidence keep borrowing costs manageable.

Opportunities for Upside Growth

Despite these challenges, the IMF sees significant upside potential. A faster-than-expected global economic recovery or higher oil prices could boost Saudi Arabia’s growth beyond current projections. Accelerated implementation of Vision 2030 projects, such as the $26 billion infrastructure spending for the 2034 FIFA World Cup, could also drive stronger-than-anticipated dividends. Additionally, the Kingdom’s leadership in emerging technologies, like artificial intelligence (AI), is enhancing its global competitiveness. Saudi Arabia ranks among the top 20 countries for AI talent density, supporting its National Strategy for Data and AI.

The MENA region, too, could see faster growth if structural reforms gain traction. Countries like the UAE and Qatar are investing in digital transformation and renewable energy, aligning with global trends toward sustainability. The IMF’s upcoming Al-Ula Conference for Emerging Market Economies, co-hosted with Saudi Arabia in February 2025, will further spotlight the region’s potential, bringing together policymakers and private-sector leaders to discuss inclusive growth strategies.

A Broader Global Context

The IMF’s optimism for Saudi Arabia and MENA aligns with its global outlook, which projects world economic growth at 3% in 2025, up 0.2% from April. Global inflation is expected to ease to 4.2% in 2025 and 3.6% in 2026, creating a favorable environment for growth. However, the IMF cautions that persistent services inflation and trade tensions could complicate monetary policy normalization. For MENA, better financial conditions and front-loaded trade activity ahead of potential tariffs are supporting growth, but sustained reforms are critical to maintaining momentum.

Looking Ahead

The IMF’s upgraded forecasts paint a promising picture for Saudi Arabia and the MENA region, but success hinges on sustaining reform momentum. For Saudi Arabia, Vision 2030 remains the cornerstone, balancing bold investments with fiscal prudence. For MENA, addressing regional challenges like conflict and uneven reform progress will be key to unlocking its full potential. As the world watches, the region’s ability to diversify, innovate, and adapt will shape its economic destiny for years to come.