Saudi Arabia’s Non-Oil Shift Strengthens Long-Term Economic Resilience

Saudi Arabia’s shift toward non-oil revenue is strengthening its long-term economic resilience, according to S&P Global Ratings. The kingdom’s digital economy is growing rapidly, supporting diversification efforts beyond hydrocarbons. However, S&P notes that substantial financing will be required to sustain this transformation, which may exceed the capacity of the banking sector alone.

Saudi Arabia recorded a fiscal deficit of $42.7 billion in the first half of 2026, a 71% increase from the previous year, driven by higher capital expenditure. S&P expects the fiscal deficit to reach 5.8% of GDP in 2026, narrowing to an average of 3.4% between 2027 and 2029. The agency also warned that disruptions from the Middle East war could persist through 2027, impacting regional oil exports.

The kingdom’s digital economy is becoming a key pillar of its diversification strategy, supported by its strategic location and expanding communications infrastructure. Saudi Arabia aims to establish itself as a regional data hub, with projects like the 1,100-km Vision Cable connecting major markets. However, the concentration of cable routes in the Red Sea and Arabian Gulf poses risks, making network diversification crucial.

Demand for local data-centre infrastructure is rising due to data residency requirements and government digitisation efforts. Operational IT capacity in Saudi Arabia stood at about 222 megawatts in the first quarter of 2025, with forecasts predicting 29% annual growth between 2024 and 2030. Significant investment in servers, power infrastructure, and cooling systems will be required to support this growth.