Saudi GDP Contracts Amid Oil Price Boost

The Kingdom of Saudi Arabia's economic data for Q2 2026 shows a complex picture. On one hand, the country's real GDP contracted by 4.8% year-over-year (y-o-y), marking its first annual contraction since 4Q 2023 and its steepest decline since the pandemic-hit 2Q 2020.

The contraction was largely driven by oil activities, which plummeted by 24.7% y-o-y due to Aramco's output cuts following the near-closure of the Strait of Hormuz. However, stripping out oil, the economy still expanded.

Non-oil activity grew a modest 0.6% y-o-y, down from 2.9% in Q1 and 4.6% in 4Q 2025, marking the fourth consecutive quarter of slowing non-oil growth. Government activity rose by 0.9%.

The government's oil revenue rose 22% y-o-y to SAR 185.1 billion during the quarter, more than making up for lost export volumes due to higher crude prices. Total Q2 revenue climbed 12% y-o-y to SAR 338.8 billion, and the quarterly deficit shrank to SAR 34.3 billion.

However, spending rose 11% y-o-y in Q2 and 15% across H1, outpacing revenue and leaving a first-half deficit of SAR 160 billion. The Kingdom is relying on borrowing to cover its shortfall, with no drawdown of government reserves.