The Saudi economy continues to benefit from the strength of its external position, supported by significant reserves and revenues from its oil and non-oil exports, despite the challenges imposed by the regional war on trade and tourism. Data from the second quarter of the current year showed a decline in the current account deficit by around 30 percent compared to the same period last year, at a time when personal remittances abroad recorded a record level. The external position refers to the totality of the Kingdom's economic and financial transactions with the rest of the world, including trade in goods and services, investment flows, financial transfers, and foreign reserves. Its resilience reflects the economy's capability to generate foreign currency, meet its external obligations, and absorb shocks, thereby providing a cushion to confront disruptions in global trade and markets. These indicators reflect the economy's capability to maintain a significant portion of its external flows under extraordinary regional circumstances, even though the components of the balance of payments were affected to varying degrees. Export revenues remained a primary source of funds entering the Kingdom, and investment returns contributed to supporting the current account, against service payments and outward remittances. According to data from the Saudi Central Bank, the current account deficit reached around $9.5 billion in the second quarter of 2026, compared to around $13.4 billion in the same period last year. The account had recorded a surplus of $4.1 billion in the first quarter, as oil revenues rose due to higher prices, coinciding with a decline in imports at the beginning of the war. The current account is one of the primary components of the balance of payments, measuring the revenues the Kingdom generates through exports of goods and services and investment income, against what it pays to purchase goods and services and transfer funds abroad. Therefore, reading its status does not depend on exports alone, but encompasses the totality of current financial flows between the Saudi economy and the world. As for the financial account, it monitors the movement of investments and capital between the Kingdom and the world, including foreign investments within the Saudi economy, investments by Saudi residents abroad, alongside flows of loans, deposits, and other financial instruments. A Saudi money changer displays Saudi Riyal banknotes at a currency exchange shop in Riyadh, Saudi Arabia July 27, 2017. (Reuters) Exports continue to support flows Despite the challenges facing trade movements, oil and non-oil exports remained an important source of external revenues. The value of oil exports reached around $54.2 billion in the second quarter, compared to $49.6 billion in the same period last year, while non-oil exports recorded around $21 billion. These figures demonstrate the export sector's continued ability to provide significant revenues, despite a decline in exports compared to the first quarter, in light of the circumstances surrounding trade and shipping movements because of the war. The Kingdom achieved a surplus of $21.7 billion in goods trade; however, this surplus shrank to around $5.4 billion when service trade was factored in as well, which recorded a deficit of $16.4 billion due to outward service payments exceeding the revenues generated from them. Remittances and investment returns In contrast to payments related to services and outward remittances, the Saudi economy recorded supportive flows from investment returns. The primary income item achieved a surplus of around $4.4 billion in the second quarter, up from $3.5 billion in the same period last year, supported mainly by returns on portfolio investments. Personal remittances abroad rose to a record level of around $18.2 billion, representing an increase of more than 30 percent year-on-year, to constitute one of the most prominent payment items in the current account. These figures highlight the multi-faceted nature of the current account components; alongside export revenues, investment returns contribute to supporting external revenues, while being offset by payments for services and personal remittances abroad. Consequently, the account balance is determined by the collective outcome of these components combined, rather than by the trajectory of a single item in isolation from the rest. Investment flows reflect capital movements Moving beyond the current account, financial account data reveals another aspect of the Saudi economy's relationship with the world, represented by cross-border capital and investment movements. While the current account records revenues from exports, services, investment income, and remittances, the financial account monitors the purchase and sale of financial assets, direct investment, loans, deposits, and other investment and financing transactions. Within this framework, Saudi Central Bank data showed shifts in investment flows between the first and second quarters. In the first quarter, Saudi investors sold foreign equities worth around $23 billion and increased their external deposits by around $13 billion, while Saudi entities borrowed about $27 billion from non-residents. In the second quarter, residents turned to purchasing foreign equities worth around $9 billion, while Saudi entities issued debt instruments valued at around $5 billion. In regard to direct investment, investment inflows from abroad into the Kingdom continued at levels exceeding $5 billion in the second quarter despite regional challenges, reaching around $5.2 billion compared to $6.2 billion in the first quarter. Direct investments by Saudi residents abroad declined to some $1.1 billion, down from $7.9 billion in the previous quarter, which contributed to a shift in net direct investment to an inflow of around $4 billion, after having recorded an outflow of about $1.7 billion in the first quarter. People walk along Riyadh's commercial Tahlia Street late at night on April 4, 2026. (AFP) Reserves boost capability to confront fluctuations The strength of the external position remains one of the elements supporting the Saudi economy in confronting regional and international turmoil. Foreign exchange reserves at the Saudi Central Bank reached around $440.7 billion at the end of September, representing a 3.7 percent increase year-on-year, in addition to the substantial foreign assets held by other public sector entities. These reserves and assets provide an important cushion for dealing with periods of uncertainty, and boost the Kingdom's capability to confront fluctuations in external flows and maintain the stability of its financial position. The International Monetary Fund's evaluation in the Article IV consultation report issued in July 2026 pointed to the strength of Saudi reserves and their ability to comfortably cover import needs. It also explained that rising domestic investment increases the demand for imports, particularly capital goods, reflecting an aspect of the requirements for economic transformation and project implementation. While second-quarter data reveals the pressures imposed by regional developments on certain components of the balance of payments, the year-on-year decline in the current account deficit and the continued strength of external reserves underscore the economy's capacity to absorb some of these repercussions. The sustainability of this position will remain linked to the recovery of trade and travel movements, oil revenue trends, and the continued expansion of non-oil sectors' contribution to exports and the provision of foreign exchange resources.
