The International Monetary Fund (IMF) has raised its forecasts for Saudi Arabia’s economic growth in 2025 and 2026 as oil price declines prove smaller than anticipated.
According to the IMF in its latest World Economic Outlook Update, the changes signal a turnaround in its expectations for the kingdom.
The IMF now expects Saudi Arabia’s economy to expand by 3.6% in 2025, 0.6percentage points higher than its previous GDP estimate in April. Among the 30 countries highlighted in the IMF update, only China’s forecast increased by more.
The IMF has also adjusted its oil price forecast for 2025. It is now predicting that crude prices will fall about by 13.9% this year. In April it was forecasting a 15.5% drop.
Saudi Arabia raised crude production for a second straight month in June, to 9.4 million barrels of oil per day, as the Opec+ group of oil exporters began to unwind cuts.
These cuts had reduced Saudi Arabia’s output to an average of 9 million bpd last year – its lowest since 2010 – from a record 10.6 million bpd in 2022.
With oil providing nearly two-thirds of state revenue, lower production and subdued prices had spurred the Saudi government to increase borrowing to help fund its massive infrastructure and diversification programme.
Oil prices rose in response to the 12-day war between Israel and Iran, although the conflict did not disrupt crude supplies.
“This geopolitics-induced increase has now largely receded and bearish fundamentals are back in focus,” the IMF report states.
Last October, the IMF was forecasting a 4.6% increase in Saudi GDP in 2025, but it slashed its estimates in January and April because of tumbling oil prices and President Donald Trump’s announcement of sweeping tariffs on April 2.
Trump has since cut or paused some of these additional tariffs until August 1. The effective tariff on Chinese imports has been reduced to 17% from 24%, according to the IMF, while businesses have front-loaded trade activity in anticipation of higher tariffs.
These events led the IMF to raise its global economic forecast to 3% from 2.8%. It has also upped its estimate for 2026 to 3.1% from 3%, as a sustained decline in the dollar helped financial conditions in many emerging markets.
Yet even with these higher estimates, such annual economic growth levels would be below 2024 (3.3%) and the pre-pandemic average of 3.7%, the IMF report states.
“Tariffs remain historically high, and global policy remains highly uncertain, with only a few countries having reached fully fleshed out trade agreements,” Pierre-Olivier Gourinchas, the IMF’s chief economist, said.
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