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IMF cuts Saudi 2025 growth forecast, flags slower oil rebound as a drag on region

The International Monetary Fund on Tuesday lowered its 2025 GDP growth forecast for Saudi Arabia, while flagging headwinds for the broader region, including a more gradual resumption of oil production.

Oil-dependent governments are coming under pressure from the lowest crude prices since the COVID-19 pandemic, with officials preparing policy responses for a drop in revenue such as issuing more debt and reducing spending.

In its World Economic Outlook, the IMF cut the forecast for Saudi Arabia's GDP growth in 2025 to 3% versus a January estimate of a 3.3% increase. IMF also reduced the projection for growth in 2026 by 0.4 percentage point to 3.7%.

Meanwhile, the growth projection for the broader Middle East and Central Asia region was lowered to 3% this year versus a 3.6% estimate earlier.

"Compared with that in January, the projection is revised downward, reflecting a more gradual resumption of oil production, persistent spillovers from conflicts, and slower-than-expected progress on structural reforms," the report said.

Saudi Arabia, the world’s top oil exporter and a G20 economy, had been expected to see a sharp growth rebound in 2025 on the back of higher crude output, with an October Reuters poll forecasting expansion of 4.4%.

But market volatility, weaker prices, and mounting global risks now threaten to weigh on the recovery, even as the kingdom pushes to diversify its economy beyond oil.

Still, Gulf oil exporters are seen as relatively well insulated from oil market volatility thanks to higher reserves, lower debt and ongoing diversification efforts, economists say.

S&P raised Saudi Arabia’s long-term sovereign credit rating to 'A+' in March, citing stronger institutions and solid non-oil growth under Vision 2030, while cautioning that weaker oil revenue could widen fiscal deficits and lead to delays or cutbacks in major infrastructure projects.