Credit rating agency Moody’s said on Tuesday that the fiscal recovery planned for Saudi Arabia in 2027 supports its view that prudent fiscal management will remain a key factor in spending and borrowing decisions. The agency also noted that reprioritizing state investments could preserve fiscal space while economic diversification continues. Commenting on Saudi Arabia’s Pre-Budget Statement for next year, the rating agency said that prolonged trade disruptions and additional spending have limited the fiscal improvement it previously expected. However, it said, Saudi Arabia’s move to rein in spending in 2027 reinforces its view that prudent fiscal management will remain a cornerstone of spending and borrowing decisions. For 2027, the government projects a spending decrease to SAR 1.392 trillion ($371.2 billion), alongside a 1% rise in revenue to SAR 1.202 trillion ($320.5 billion); this would narrow the projected deficit to around SAR 191 billion ($50.7 billion), equivalent to 3.6% of GDP. Moody’s said the government's ability to reprioritize investments linked to Saudi Vision 2030 could preserve fiscal space while economic diversification continues. Focusing resources on projects with strong returns would likely help reconcile growth objectives with spending restraint. As for oil, the agency expected that disruptions to strategic shipping routes will persist through the end of the first half of 2027, which could affect oil production. However, it noted that higher oil prices have cushioned the impact of lower production and exports in recent months. Saudi Arabia's real GDP is expected to contract 3.6% in 2026, largely because of a sharp decline in oil activity, even as the non-oil economy continues to expand, according to the Ministry of Finance's Pre-Budget Statement for 2027. The Ministry estimates that oil activity will decline by around 21.8% this year, while non-oil activities are expected to grow 3.2%, helping cushion the impact of lower oil output on the wider economy. Non-oil activity grew 1.8% in the first half of 2026, lifting its contribution to GDP to a record 57.3%, the statement said. Moody’s review reflects a credit assessment of the Pre-Budget Statement for 2027 that places more emphasis on the government's capability to recalibrate investment and prioritize spending efficiency while explicitly preserving its overarching economic diversification goals. This, it said, would help preserve fiscal flexibility amid geopolitical strains and global market uncertainties.
