- Wholesale and retail trade, restaurants, and hotels lead at an 8.4% annual increase
- Oil activities contracted by 0.5% year on year
RIYADH: Saudi Arabia’s economy expanded by 3.4 percent year on year in the first quarter of 2025, propelled by robust growth in non-oil activities, according to official data.
The estimates released by the General Authority for Statistics showed that the seasonally adjusted real gross domestic product also saw a quarterly rise of 1.1 percent, signaling sustained economic momentum.
The non-oil sector emerged as the primary engine of growth, increasing by 4.9 percent compared to the first quarter of 2024. In contrast, oil activities contracted by 0.5 percent year on year, reflecting ongoing volatility in the energy sector.
Saudi Arabia’s GDP growth aligns with the broader Middle East trend, where countries are steadily advancing economic diversification.
The UAE’s Ministry of Economy forecasts a 5-6 percent growth rate in 2025, fueled by robust performance in key sectors such as technology, renewable energy, trade, financial services, and infrastructure.
Meanwhile, Fitch Ratings has lowered Qatar’s 2025 real GDP growth forecast from 2.9 percent to 2.6 percent, citing the effects of US tariffs on global growth, weaker energy prices, and heightened investor caution amid rising international uncertainty.
In a release covering the latest Saudi Arabia figures, GASTAT stated: “The main driver of growth in real GDP was non-oil activities, which contributed 2.8 percentage points. Government activities and net taxes on products also contributed positively adding 0.5 and 0.2 PP respectively.”
Sectoral performance
According to the GASTAT report, several non-oil sectors posted strong growth across the quarter, with the wholesale and retail trade, restaurants, and hotels sector leading at an 8.4 percent annual increase.
The transport, storage, and communication sector also showed robust performance, growing by 6 percent year on year.
Meanwhile, finance, insurance, and business services expanded by 5.5 percent despite experiencing a slight 0.1 percent quarterly dip.
These gains highlight the diversification and resilience of the economy beyond the oil industry.
Gross fixed capital formation jumped by 8.5 percent annually, underscoring confidence in the economy, while government spending rose by 5.2 percent. Private consumption grew by 4.5 percent year on year, though it declined slightly from the previous quarter.
Trade balance improvement
Saudi Arabia’s exports rebounded sharply, rising by 12.3 percent quarter on quarter, while imports fell by 10 percent over the same period, narrowing the trade deficit.
The data highlights the Kingdom’s progress in diversifying its economy under Vision 2030, with non-oil sectors increasingly offsetting fluctuations in oil revenues.
In its latest World Economic Outlook report, the International Monetary Fund projected Saudi Arabia’s GDP to grow by 3 percent in 2025, a downward revision from its January estimate of 3.3 percent. The IMF also trimmed its projection for 2026, reducing the expected growth rate by 0.4 percentage points to 3.7 percent.
These forecasts reflect broader trends in the global economic environment, where shifts in energy markets and oil production adjustments continue to play a pivotal role in shaping near-term growth prospects.
The Kingdom’s economic performance remains closely tied to hydrocarbon sector dynamics, but ongoing reforms under Vision 2030 are gradually reducing this dependence, fostering more sustainable, long-term growth.
Further reinforcing this outlook, a December 2024 report from Mastercard Economics emphasized the accelerating expansion of Saudi Arabia’s non-oil sector, which has become a key driver of economic resilience.
The analysis projected that the Kingdom’s GDP will grow by 3.7 percent year on year in 2025, a figure slightly higher than the IMF’s estimate, largely due to strong performance in non-oil industries such as tourism, entertainment, technology, and manufacturing.
The Mastercard report also noted that economic diversification will remain a top priority in 2025, with Saudi authorities leveraging the country’s strong fiscal buffers to fund ambitious infrastructure projects and attract private investment.
Key initiatives include mega-developments like NEOM, the Red Sea Project, and Qiddiya, alongside investments in renewable energy and digital transformation.
“Population growth is an important driver of economic activity, and particularly private consumption,” the report added.
Source: www.arabnews.com