Overview:

Saudi Arabia's public finances posted mixed signals in the second quarter of 2026. The kingdom collected 90.3 billion dollars in government revenue—338.7 billion Saudi riyal—against expenditures of 99.5 billion dollars. However, real gross domestic product contracted 4.8 percent compared to the prior-year quarter, driven largely by a sharp decline in oil-sector output, while non-oil activities expanded modestly at 0.6 percent growth.

Details:

The General Authority for Statistics released rapid estimates showing the contraction occurred despite stable crude oil prices and regional geopolitical tensions. Real GDP declined 4.8 percent year-over-year in Q2 2026, marking a significant economic headwind. Government sector activities grew 0.9 percent on an annual basis, whereas non-oil private activity advanced only 0.6 percent, reflecting subdued domestic demand and investment momentum.

On the fiscal front, the Ministry of Finance reported actual revenues of 338.784 billion riyal against expenditures of 373 billion riyal, leaving a budget shortfall for the quarter. The International Monetary Fund commended the Saudi Arabian Monetary Authority's liquidity management practices and monetary policy effectiveness, noting that the riyal peg to the US dollar continues to anchor financial stability. The fund acknowledged the economy's resilience against geopolitical tensions in the Middle East.

Commodity markets remained volatile as oil prices held steady amid conflicting signals. Gold prices stabilized as investors assessed the US Federal Reserve's decision to maintain interest rates at elevated levels for a fifth consecutive occasion. The domestic stock market declined 0.5 percent on July 29, closing at 10,624 points, while point-of-sale transactions exceeded 226 million operations totaling 12.26 billion riyal during a single week.

Outlook:

Investors are monitoring whether non-oil economic expansion can accelerate beyond the current 0.6 percent pace as fiscal pressures mount. The international monetary community is watching whether domestic credit conditions and consumer spending rebound, especially as global interest rates remain elevated and regional risk premiums persist.