Saudi Arabia's economy grows 3% in Q1 2026 despite regional tensions

Saudi Arabia's economy demonstrated robust fundamentals in the first quarter of 2026, achieving 3 percent real GDP growth year-on-year. This performance exceeded earlier projections of 2.8 percent, showcasing the Kingdom's resilience amidst escalating Middle East tensions that have impacted global supply chains and trade. The upward revision by the General Authority for Statistics (GASTAT) reflected stronger growth in both oil and non-oil activities, which each expanded by 2.9 percent.

This economic strength was evident across all major sectors. Financial services and business services led the charge among detailed sectors, growing 5.4 percent annually, while manufacturing (excluding oil refining) expanded by 4 percent. Crude oil and natural gas activities also saw a 3.6 percent increase from the previous year, even as quarterly oil activity declined due to shipping disruptions. Government activities and non-oil sectors continued to show quarterly growth, contributing to the overall expansion.

Despite these positive indicators, the International Monetary Fund (IMF) has adjusted its 2026 growth forecast for Saudi Arabia downward to 2 percent from 3.1 percent. The IMF acknowledged the Kingdom's success in mitigating the effects of regional conflict through resilient infrastructure, efficient logistics, and strong financial buffers. However, persistent regional instability remains a key concern influencing the revised outlook. Consumption and investment also remained strong, with significant year-on-year increases in government and private consumption, alongside robust growth in gross fixed capital formation, indicating continued investment momentum.