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Oil will be the main driver of Saudi Arabia's economic growth in 2025, after two years of modest performance. Learn how this new phase of expansion promises to revolutionize the country's economy and impact the global market!
Saudi Arabia's economy is poised to accelerate in 2025, driven by oil production, after two years of modest growth. According to a survey by Reuters with economists expecting growth to be robust in other Gulf Cooperation Council (GCC) member countries as well.
Saudi Arabia: Increased Oil Production and Economic Impact
The Organization of the Petroleum Exporting Countries and its allies, led by Russia (OPEC+), have been cutting oil production since late 2022, but are expected to increase output in December 2024. This move is expected to boost revenues for the six GCC countries, which are heavily dependent on oil.
Oil prices, currently around $74,8 a barrel, are expected to rise to an average of $76,75 in 2025, according to another Reuters poll.
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Saudi Arabia, the world's largest crude oil exporter, is preparing to abandon its target of reaching $100 per barrel. By increasing its share of the market, the kingdom will be able to reverse previous cuts in production, which will help boost its economic growth.
Growth forecasts for 2025
According to the survey conducted between October 9 and 22, the Saudi economy is expected to expand 4,4% in 2025, the strongest growth in three years, surpassing the 1,3% forecast for 2024. The average growth forecast for GCC economies next year is 4,1%, up from the 3,7% forecast made in July.
Economists indicate that the fall in oil prices will be offset by increased production volumes, which will continue benefiting real GDP growth. Ralf Wiegert, head of MENA economics at S&P Global Market Intelligence, said: “We expect the effects of lower oil prices and higher production volumes to balance out, benefiting growth.”
Economic Diversification: An Ongoing Challenge
Major GCC countries such as Saudi Arabia, the United Arab Emirates (UAE) and Qatar are exploring ways to diversify their economies, which have traditionally been dependent on oil. However, even as diversification progresses, economists believe that oil revenues will continue to play a crucial role.
Wiegert notes: “NIn the long run, non-oil revenues will not be able to completely replace oil revenues for these economies.. "
United Arab Emirates: The leader in growth
Among the GCC countries, the UAE is projected to be the fastest-growing economy, expanding by 4,9% in 2025, compared with 3,7% in 2024. Economist James Swanston of Capital Economics says the UAE is in a privileged position as it has received increases in its oil production quotas but has not yet been able to fully take advantage of them.
Furthermore, the Emirates, with its already well-developed non-oil economy, is able to sustain sectors such as tourism and financial services, highlighting Dubai as a successful example.
Qatar: An example of diversification
Qatar has also been making progress in diversifying its economy, with economic growth expected to accelerate to 2,7% in 2025, up from 2,1% in 2024. Like the UAE, Qatar is better placed to deal with the decline in global oil demand by relying on other sectors to keep its economy stable.
In the rest of the GCC, growth expectations are more subdued. For 2025, GDP growth in Bahrain, Kuwait and Oman is expected to be 2,8%, 2,5% and 2,8%, respectively. This represents a recovery from the 2024 growth projections, which indicate 2,8%, -1,3% and 1,6% for these countries.
Inflation in the GCC has remained stable and is expected to remain low, with forecasts of 0,8% to 3% for 2024 and 2025. This contributes to a more predictable economic environment, favoring financial planning for countries in the region.
The economic growth of the GCC nations in 2025 will be marked by the resumption of oil production, but also by continued efforts to diversify. Despite advances in non-oil sectors, oil will remain an important pillar for these economies in the coming years.
