Morgan Stanley cuts Saudi Arabia 2026 GDP forecast due to oil supply delays
Morgan Stanley has revised its 2026 GDP forecast for Saudi Arabia, now predicting a contraction of -1.8%. The investment bank cited a prolonged disruption in oil supply as the primary reason for the adjustment, pushing the normalization of oil export volumes into the second quarter of 2027.
The firm noted that oil export volumes in the third quarter of 2026 fell short of expectations, despite support from non-oil activities, which are projected to grow by 3%. Crude production is expected to average 6.3 million barrels per day in the fourth quarter of 2026, leading to a 28% year-over-year contraction in oil activity. Full-year oil GDP is estimated to shrink by 17.8% in 2026.
Morgan Stanley anticipates a strong rebound in 2027, with oil GDP projected to expand by approximately 23% as production and export capacity gradually normalize. Fiscal buffers remain intact, with higher oil prices offsetting weaker production volumes. Oil fiscal revenue is expected to reach 685 billion Saudi riyals in 2026, rising to 740 billion riyals in 2027 as export volumes recover.
Non-oil activities showed resilience in the second quarter of 2026, with government consumption growing 3.2% year-over-year. The Saudi PMI remained in expansion territory at 53.8 in August, and banking sector loan growth edged up to 7.0% year-over-year in the same month.