IMF Wraps Up 2026 Article IV Talks with Saudi Arabia

Washington, DC: On July 22, 2026, the Executive Board of the International Monetary Fund (IMF) completed the Article IV Consultation for Saudi Arabia. ^[1]

The Saudi economy entered 2026 with strong momentum. GDP expanded by 4.6 percent in 2025, supported by the unwinding of OPEC+ production cuts and robust non-oil activity driven by domestic demand. Inflation eased to below 2 percent, and the labor market remained strong, with unemployment among Saudis at low levels. The Saudi Central Bank's foreign reserves remained comfortable, and the banking sector maintained strong buffers.

The war in the Middle East and the near halt in shipping through the Strait of Hormuz have disrupted activity, curtailed trade, including oil exports, and dented confidence. The economy is showing agility and resilience, reflecting Saudi Arabia's strong macroeconomic fundamentals and diversified oil and logistics infrastructure. Rerouting oil through the East-West pipeline to Red Sea ports has limited the drop in oil deliveries, while higher oil prices have more than offset volume losses, generating an oil revenue windfall. High-frequency indicators point to early stabilization in non-oil activity in April-June, after a likely contraction in March.

A recovery is expected to take hold once maritime traffic through the Strait gradually returns to normal. Growth is projected to slow to 1.7 percent in 2026, with non-oil growth easing to 2.6 percent. Activity will continue to be supported by domestic demand, underpinned by stable employment, robust government spending, and the steady execution of capital projects. Inflation is projected to rise modestly to 2.2 percent, reflecting higher shipping and insurance costs partly offset by subdued rent inflation and price caps on some fuel and food items. Higher oil revenues are expected to narrow the current account and fiscal deficits this year. Over the medium term, growth will be supported by buoyant consumption and investment, including government-led projects and major international events, and by sustained structural reforms under Vision 2030.

The outlook hinges critically on the evolution of the conflict, with risks to the downside. Continued disruptions to shipping through the Strait could further curtail trade, weaken confidence, and weigh on growth and diversification. Other downside risks stem from global developments: weaker demand, trade tensions, tighter financial conditions, and a sustained decline in oil prices. On the upside, faster normalization of maritime traffic, higher oil prices or production, and stronger implementation of productivity-enhancing reforms would support growth.

Executive Board Assessment ^[2]

Executive Directors welcomed the Saudi economy's resilience in the face of the war in the Middle East and the associated disruptions to shipping, trade, and oil exports. They considered that resilience owes to policy efforts anchored in Vision 2030 and reflected in sound macroeconomic fundamentals, including ample fiscal and external buffers; diversified energy and logistics infrastructure, such as the East-West pipeline; and effective crisis management. Directors commended the authorities' efforts to support trade rerouting, which helped to support the resilience of regional economies and of the global energy markets. Directors welcomed the steady reform progress that has strengthened institutions, bolstered economic performance, and helped preserve macroeconomic and financial stability.

Directors noted that the outlook remains highly uncertain, with risks to the downside. While a gradual recovery is expected once maritime traffic through the Strait of Hormuz normalizes, an escalation or prolongation of the conflict could heighten uncertainty and weigh on growth prospects. Directors therefore emphasized the importance of maintaining policy flexibility, safeguarding buffers, and updating contingency plans-including to preserve confidence.

Directors agreed that a modest reduction in the non-oil primary deficit in 2026 is appropriate, with any fiscal response to the shock accommodated through spending reprioritization. Directors commended the authorities' policy prudence and found the non-fiscal measures taken so far to be appropriate, while noting that any fiscal support should be temporary, targeted, and transparent. Directors generally considered that, should the shock prove more pronounced, Saudi Arabia has the fiscal space to ease its stance and cushion the economy.

Directors welcomed the authorities' commitment to medium-term fiscal sustainability, noting that, as conditions normalize, ambitious fiscal consolidation will be needed to ensure adequate savings for future generations. They emphasized the importance of non-oil revenue mobilization, expenditure rationalization, improved public investment management, energy subsidy reform, and continued strengthening of fiscal institutions and frameworks.

Directors agreed that the currency peg to the U.S. dollar remains appropriate. They acknowledged the Saudi Central Bank's prudent liquidity management. They welcomed Saudi Arabia's financial stability, taking positive note of the banking sector's strong capital and liquidity buffers and the progress in implementing the 2024 FSAP recommendations, including the activation of the countercyclical capital buffer and advances in crisis preparedness. They encouraged continued efforts to enhance monitoring of credit conditions and vigilance regarding FX funding risks, sovereign-bank linkages, and exposures to large projects.

Directors commended the substantial progress under Vision 2030, now marking its 10 years, which has strengthened the non-oil economy, expanded the role of the private sector, advanced economic diversification, and delivered measurable gains in labor market outcomes, including female labor force participation. Directors saw Vision 2030 as a source of valuable lessons for other countries embarking on ambitious reforms and for Fund engagement. Directors stressed the importance of sustaining the reform momentum. They welcomed the renewed emphasis on resilience, including through investments in logistics infrastructure. They encouraged continued efforts to deepen diversification, improve the business environment, develop capital markets, enhance human capital and labor market outcomes, strengthen governance and transparency, as well as advance digitalization. Directors welcomed the recalibrated PIF strategy aimed at more selective capital allocations and greater private sector role to foster productivity. Directors also highlighted the benefits of deeper GCC integration in enhancing the region's resilience.

Directors commended Saudi Arabia for its leadership in multilateral fora, including the G20 and the role of the IMFC Chair, and looked forward to its continued contributions to addressing global challenges.

[1] Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.

[2] At the conclusion of the discussion, the Managing Director, as Chair of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summing ups can be found here: https://www.imf.org/external/np/sec/misc/qualifiers.htm