DUBAI: Saudi Arabia’s economic landscape is poised for significant transformation in the coming year, as indicated by a recent Reuters poll of economists.
Following a period of modest performance characterised by subdued growth, forecasts suggest that the Saudi economy is set to expand by 4.4 per cent in 2025. The surge will be driven primarily by an increase in oil production, marking a notable recovery from an expected growth of only 1.3 per cent this year.
The backdrop for this optimistic projection is the anticipated shift in oil output policies by the Organisation of the Petroleum Exporting Countries and its allies, collectively known as OPEC+. Since late 2022, OPEC+ has implemented production cuts to stabilise the oil market.
However, reports indicate a readiness to increase output in December, which should invigorate revenues across the Gulf Cooperation Council (GCC) countries, including Saudi Arabia, the United Arab Emirates, and Qatar.
Shift in production strategy
Despite forecasted crude oil prices remaining weak—averaging around $76.75 per barrel compared to the present $74.8—the shift in production strategy allows Saudi Arabia to eschew its previous target of reaching $100 per barrel.
The tactical pivot is expected not only to enhance market share but also contribute to robust growth in non-oil revenue sectors.
Within this regional context, other GCC economies are also expected to experience accelerated growth. The average forecast for GCC economies stands at 4.1 per cent for 2025, up from 3.7 per cent in previous estimates.
Noteworthy is the observation from the economist Ralf Wiegert at S&P Global Market Intelligence, who posits that the interplay between lower oil prices and increased production volumes will synergistically bolster real GDP growth across the region.
Moreover, while efforts to diversify from oil dependency are ongoing in prominent GCC economies, the importance of oil revenues remains unequivocal. Economists assert that non-oil revenues, despite their growth, are unlikely to supplant oil revenues in the foreseeable future. The UAE is projected to lead in regional growth at 4.9 per cent, buoyed by its diversified economy, while Qatar expects to reach a growth rate of 2.7 per cent.
