Saudi economy remains resilient amid regional conflict, IMF says

Saudi Arabia's economy has remained resilient despite disruptions from the ongoing Middle East conflict, the International Monetary Fund said following a mission to Riyadh from April 28 to May 13.

The IMF assessment, conducted under the 2026 Article IV consultation and led by Azim Sadikov, found that diversified energy infrastructure, alternative export routes and strong fiscal buffers had helped absorb the shock. The Fund's report is expected to go before its Executive Board in July.

How is Saudi Arabia's economy holding up amid the regional conflict?

The IMF said Saudi Arabia entered 2026 with strong momentum after GDP expanded 4.5% in 2025, driven by gradual OPEC+ output increases and robust non-oil activity.

Despite disruptions from the conflict and reduced maritime traffic through the Strait of Hormuz, the economy has shown resilience through infrastructure flexibility and strong government finances. Inflation remained below 2% and labor market conditions stayed favorable heading into the year.

How has Saudi Arabia managed the Strait of Hormuz disruptions?

Oil shipments were redirected through the East-West pipeline and Red Sea ports, reducing dependence on the strait. Overseas inventories held by Saudi Aramco also helped maintain supply stability for international buyers. High-frequency indicators suggest non-oil activity began stabilizing in April after a likely contraction in March.

The IMF noted that low public debt, strong foreign reserves and a large sovereign wealth fund continue to provide substantial buffers against external shocks. Mission chief Sadikov said the conflict and curtailment of maritime traffic had "disrupted trade, weighing on the oil and non-oil sectors." The Kingdom's ability to reroute exports has been central to limiting the economic damage so far.

What is the IMF's growth forecast for Saudi Arabia in 2026?

The IMF now projects Saudi Arabia's economy will grow around 2% in 2026, lower than earlier forecasts but still positive given regional uncertainty. The projection assumes shipping routes through the Strait of Hormuz normalize in the coming months, enabling a gradual recovery. Domestic demand, supported by government spending, public employment and ongoing investment projects, is expected to sustain non-oil growth through the year.

Inflation is projected to rise to around 2.3% as higher shipping and insurance costs feed through to prices. Elevated oil prices are expected to offset weaker export volumes and help narrow fiscal and current-account deficits. The Fund supported a modest reduction in the non-oil primary deficit as an appropriate policy response for 2026.

What risks could derail the Saudi economic outlook?

The IMF warned that further escalation in the regional conflict remains the biggest downside risk. A worsening situation could disrupt shipping lanes, damage regional energy infrastructure, reduce output and increase financial-sector vulnerabilities. It could also weaken investor confidence and slow medium-term diversification efforts under Vision 2030.

The IMF said spending reprioritization should be the primary tool to accommodate any additional support measures. It also noted that Saudi Arabia has sufficient fiscal space for temporary, targeted assistance if the conflict persists. Over the medium term, the Fund called for renewed fiscal consolidation, stronger non-oil revenues and continued energy subsidy reforms, while protecting vulnerable groups.

How does Vision 2030 factor into Saudi Arabia's resilience?

Marking a decade since the launch of Vision 2030, the IMF said reforms have strengthened institutions, improved policymaking and reduced reliance on oil revenues. The Fund welcomed the recalibrated 2026 to 2030 strategy of the Public Investment Fund, which places greater emphasis on selective investment and private-sector participation. Maintaining reform momentum, the IMF said, will be key to sustaining growth and long-term resilience.

The IMF also highlighted priorities including improving the business environment, deepening capital markets, supporting SMEs and aligning education with labor market needs. Saudi Arabia's banking sector remains well-capitalized and liquid, with the Saudi Central Bank stepping up monitoring of credit quality and financial risks. The Fund backed the central bank's decision to implement a 100-basis-point countercyclical capital buffer and strengthen emergency liquidity frameworks.