Despite government efforts to shift revenue collection away from oil, more than 50% depends on hydrocarbons and no major shift is expected in the midterm, leaving fiscal outcomes highly exposed to oil price and production swings. While the oil-price break even is forecast to decrease to USD88 per barrel in 2026 from USD94 in 2025, it remains too high compared to the current oil price (USD65/barrel on average in 2025 and USD61/barrel expected in 2026) to expect an improvement in Saudi Arabia’s fiscal stance. Since 2023, Saudi Arabia has increased its reliance on oil, given Vision 2030 spending needs, as also demonstrated through surged of domestic and foreign borrowing to finance budget shortfalls. The fiscal deficit is estimated to improve from 5% in 2025 to around 4% of GDP in 2026. Public debt is projected to reach 35.4% of GDP. Despite the non-oil primary balance continuing at -20%, improvements continue thanks to the growing non-oil economy.

To bridge the fiscal gap and sustain ambitious investment projects, both the government and the Public Investment Fund (PIF) have increased borrowing. The period of Saudi Arabia as a global lender is now far behind. In 2025, external borrowing and bond issuance exceeded USD37bn, among the largest annual issuances. In 2026, the Kingdom approved a significant higher borrowing plan of US57bn, planning to cover an anticipated budget deficit of US44bn. External debt has steadily risen since 2022, reaching 34.8% in 2025, illustrating the growing reliance on international financing. But considering debt ratios and international reserves, Saudi Arabia continues to have a good record of debt sustainability. 

Saudi Arabia’s external position has been weakening over the past years. The current account balance registered a deficit of -3% of GDP in 2025 and is expected to further increase to -4% in 2026 as oil prices continue to decline and imports linked to Vision 2030 projects increase. As a result, the central bank’s net foreign assets have been slightly declining since Q3 2024 though foreign exchange reserves remain well above a year in months of imports. At the same time, the financial account has also been in deficit since Q2 2024, with FDI inflows lower than expected at 1.9% of GDP in Q2 2025 compared to the Vision 2030 target of 5%.

Saudi Arabia’s business environment has strengthened markedly since 2016, reflecting regulatory reforms and the government’s push to diversify the economy under Vision 2030. In the last 24 months, Saudi Arabia’s leadership has begun shifting some of its investment from mega-infrastructure projects to AI and tech-related ones, such as increasing data center capacity and investing in specific tech companies. While this shift should build greater productive capacity, it also exposes the country to global equity markets, which are currently very highly valued. The state remains central, but the privatization of major firms and opportunities for foreign investors in Saudi Aramco highlight a gradual shift toward greater private-sector participation. Competition policy, foreign direct investment (FDI) and the political climate have improved. A new Investment Law enacted in February 2025 ensures equal treatment of foreign and local investors, reinforcing fair competition. 

Strengths include a favorable taxation regime, technological readiness and economic stability. Market opportunities are expanding, supported by the Public Investment Fund’s infrastructure investments and diversification into manufacturing, tourism, mining and renewable energy. Weaknesses persist in the labor market, where shortages of skilled workers sustain reliance on expatriates despite Saudization efforts. Financing remains a challenge, with rising external debt and weak oil prices weighing on the Tadawul stock market. The overall index fell by 13% in 2025.

Internal politics are not expected to change, with Mohammed bin Salman continuing to be the de facto leader. The crown prince is expected to continue diversifying the economy with Vision 2030 and opening up the country through highly visible sports and cultural events, such as the 2034 FIFA World Cup and the 2030 Riyadh Expo. Under his leadership, Saudi Arabia has been establishing new partnerships while strengthening its ties with both China and the US to attract investment in AI, EVs, real estate and beyond.  Regional instability remains a top risk for Saudi Arabia. Conflict between Israel and Iran resurfaced geopolitical risks in the region, including threats to the navigation of energy flows through the Hormuz Strait. Infighting in Yemen slowed in mid-January 2026 after an escalation in late 2025.