Saudi Arabia GDP Contracts for First Time in Over 2 Years

Saudi Arabia’s economy contracted 4.8% year-on-year in the second quarter of 2026, reversing the 3.0% expansion in the previous quarter, preliminary data showed. This marked the first decline since the fourth quarter of 2023, weighed down by a sharp contraction in oil activities, which fell 24.7% year-on-year and subtracted 5.4 percentage points from overall GDP growth. Meanwhile, non-oil activities and government activities continued to expand, though at slower rates, with non-oil activity growth easing to 0.6% from 2.9% in Q1 and government activity growth slowing to 0.9% from 1.5%. On a seasonally adjusted quarterly basis, GDP declined 4.9%, following a 1.2% contraction in the previous quarter, as oil activities dropped 21.5% and non-oil activities decreased 0.5%, while government activities increased 0.2%.

Saudi Arabia’s economy expanded 3.0% year-on-year in the first quarter of 2026, revised higher from a preliminary estimate of 2.8% but slowing from 5.0% growth in the previous period. This marks the softest economic expansion since the second quarter of 2024, as growth in oil activities slowed to 2.9% from 10.8% in Q4, pressured by ongoing US–Iran tensions that disrupted shipping through the Strait of Hormuz, a critical chokepoint for about 20% of global oil and LNG trade. Non-oil activities also rose at a softer pace of 2.9%, down from 4.6% in the prior quarter. Meanwhile, government activities rebounded by 1.5%, following a 1.2% contraction in the previous period. On a quarterly basis, the economy contracted by 1.2% in Q1, primarily due to a 6.8% decline in oil activities, which was partially offset by increases of 1.4% in government activities and 0.3% in non-oil activities.

Saudi Arabia’s economy expanded 2.8% year-on-year in the first quarter of 2026, slowing sharply from a 5% growth in the previous quarter, preliminary data showed. This marked the weakest pace of expansion since the second quarter of 2024, weighed down by tensions between the US and Iran that disrupted shipping through the Strait of Hormuz, a key route for roughly 20% of global oil and LNG supply. Growth in non-oil activities (2.8% vs 4.3% in Q4) and oil activities (2.3% vs 10.8%) decelerated sharply. Meanwhile, government activities rose 1.5%, rebounding from a 1.2% decline in the prior period. On a quarterly basis, GDP fell 1.5%, the first decline since the third quarter of 2023, following a 1.4% increase in the previous quarter. The IMF noted that the country is expected to be less heavily affected by the conflict than other Gulf states, given its ability to reroute part of its exports through alternative channels, alongside the relative resilience of its non-oil industrial sector.