The International Monetary Fund (IMF) affirmed that the Saudi economy has demonstrated high resilience in the face of regional geopolitical tensions that have obstructed navigation in the Strait of Hormuz. The Fund praised the Kingdom's ability to contain the fallout from the navigation disruption through a swift logistical response, which involved redirecting oil shipments towards the East-West pipeline and Red Sea ports, leveraging the legacy of its Vision 2030 structural reforms. “The Saudi economy is demonstrating agility and resilience, supported by robust and diversified infrastructure and the authorities’ concerted efforts to redirect shipments and ease logistical bottlenecks,” mission head Azim Sadikov said on Wednesday in the IMF's latest Article IV mission report following a visit to the Kingdom from April 28 to May 13. “A prompt rerouting of oil through the East-West pipeline and Red Sea ports, combined with Aramco’s overseas inventories, has helped limit the drop in oil deliveries," it said. "Saudi Arabia's strong fundamentals—low government debt, ample reserves, and a large sovereign wealth fund—provide important buffers,” the report added. “Assuming maritime shipments through the Strait of Hormuz normalize in the coming months, a recovery could take hold, with growth this year notably lower but holding up at about 2 percent. Non-oil activity would be supported by domestic demand, underpinned by stable public employment, government spending, and the steady execution of private and public capital projects. Average inflation is projected to increase to about 2.3 percent as higher shipping and insurance costs add upward pressure on prices. Higher oil prices are expected to offset volume losses, generating a windfall that would reduce the current account and fiscal deficits in 2026.” In its April 2026 World Economic Outlook, the IMF projected Saudi Arabia’s real GDP growth at 3.1% for 2026, 1.4 percentage points lower than a January estimate. It had said that the Kingdom was expected to be less severely affected by the war. In the Outlook, the IMF also upgraded Saudi Arabia's 2027 GDP growth forecast to 4.5%, a 0.9% increase from previous projections. This upward revision reflected anticipated normalizations in energy output and logistics. In Wednesday’s report, the IMF said given the Saudi economy’s resilience, “the mission considers that a modest reduction in the non-oil primary deficit in 2026 remains appropriate, with spending reprioritization as the first line of action to accommodate any fiscal response to the conflict.” The report lauded Saudi Arabia's strong fundamentals—low government debt, ample reserves, and a large sovereign wealth fund— that provide important buffers. It said that should the shock prove more prolonged, Saudi Arabia has the space to loosen the fiscal stance to cushion the economy, with support to affected businesses and households that should be temporary, targeted, and transparent. As the economy normalizes, an ambitious medium-term fiscal consolidation anchored on non-oil revenue mobilization and spending rationalization is needed, it said. On the banking sector, the IMF said: “The peg to the US dollar provides a credible monetary policy anchor and helps underpin financial stability, particularly in the current environment of heightened uncertainty.” “The banking sector is well-positioned to weather the shock, supported by strong capital and liquidity buffers,” it added. The mission welcomed the efforts of the Saudi Central Bank (SAMA) to step up the monitoring of liquidity, credit conditions, and asset quality. It also supported “SAMA's decision to proceed with the implementation of the 100 basis points countercyclical capital buffer, its proactive approach to containing risks from FX borrowing, and continued progress in strengthening its resolution and emergency liquidity assistance frameworks.” The report added: “Ten years since its launch, Vision 2030 reforms have helped strengthen institutions and improve policymaking, boosting economic performance and reducing dependence on oil.” “Sustaining the reform momentum to remove remaining impediments to diversification and to expand the role of the private sector will be key to maintaining strong growth prospects for the medium term,” it said. In this regard, the IMF lauded PIF's recalibrated 2026–30 strategy, with its shift toward more selective capital allocation and greater private-sector crowding-in. The report called for “improving the business environment, deepening capital markets, supporting small and medium enterprises, aligning education with labor market needs, strengthening governance, and scaling AI adoption while mitigating associated risks.”
