RIYADH: Saudi Arabia's economy is forecast to grow by more than twice the global rate in 2027, with a 7.9 percent expansion projected by the International Monetary Fund.
The growth — outpacing the expected global average of 3.4 percent — will be supported by the Kingdom’s diversified energy export routes, which have helped cushion the impact of regional disruptions.
The IMF raised its Saudi growth forecast for 2027 by 2.4 percentage points from its July update, signalling a stronger rebound following an expected contraction this year as the Middle East conflict and the prolonged closure of the Strait of Hormuz disrupt energy production and trade across the region.
The Kingdom’s gross domestic product is projected to shrink by 3.3 percent in 2026, after expanding by 4.6 percent in 2025, according to the IMF’s October World Economic Outlook.
The forecast is in line with a World Bank release issued earlier this month projecting that the Kingdom’s GDP would contract by 2 percent in 2026 before rebounding by 7.9 percent in 2027.
In its latest report, the IMF forecast Bahrain, Iraq, Kuwait, and Qatar will experience double-digit contractions of their economies in 2026 due to a longer closure of the Strait of Hormuz.
“Saudi Arabia is somewhat less affected, as an economy with more diversified export routes, with a projected contraction of 3.3 percent in 2026 and growth of 7.9 percent in 2027,” said the report
The recovery depends on trade and energy flows returning to normal. The IMF expects the Strait of Hormuz to begin reopening in March 2027, with shipping conditions returning broadly to pre-war levels by October.
According to the report, Saudi Arabia’s inflation rate is also expected to remain contained at 1.9 percent in 2026 and 2.2 percent in 2027.
Globally, the IMF projects growth of 3.1 percent in 2026 — an upward revision of 0.1 percentage point from its July update — down from an estimated 3.5 percent in 2025 before accelerating to 3.4 percent in 2027.
“Global economic activity has proven resilient once again. The technology upturn, buffers, and adaptations have helped mitigate the damage from geopolitics-driven disruptions,” it added.
The fund warned that the outlook remains vulnerable to a prolonged conflict, higher energy prices and renewed disruptions to shipping.
Investment, tourism and logistics
Commenting on Saudi Arabia’s economic outlook for 2027, Thomas Kuruvilla, managing partner of Arthur D. Little Middle East and India, told Arab News that a “recovery in regional stability and economic activity should support investor confidence, while Saudi Arabia’s public investment capacity provides continuity for major projects and reforms.”
He added: “The bigger opportunity is for that confidence to translate into deeper private and international capital participation.”
Kuruvilla said Saudi Arabia’s tourism sector should also benefit as regional confidence and travel normalize, but the more important development would be the sector’s shift from rapid capacity expansion toward sustainable value creation.
“The next phase will increasingly be about occupancy, pricing power, visitor spending and returns on those assets,” he said.
Kuruvilla said logistics could be one of the clearest beneficiaries of the recent disruption, which had reinforced the value of resilient and diversified trade routes.
“Saudi Arabia combines Red Sea access, Gulf connectivity and significant investment in ports, airports, rail and logistics infrastructure.”
As companies place greater emphasis on supply-chain resilience alongside cost and efficiency, he noted that the Kingdom has an opportunity to strengthen its position as a regional logistics and distribution hub connecting Asia, Europe and Africa.
Regional outlook
The broader Middle East and Central Asia region is forecast to contract by 0.3 percent in 2026 — a significant downward revision from earlier projections — before expanding by 6.3 percent in 2027.
Having identified Bahrain, Iraq, Kuwait and Qatar as among the hardest hit economies in the region in 2026, the IMF forecast double-digit expansions for them in 2027 once conditions normalize.
The UAE economy is expected to contract by 3.9 percent in 2026, followed by a sharp rebound to 7.7 percent in 2027.