Saudi Arabia economic outlook: GDP contraction and FDI decline

Saudi Arabia is facing a complex economic landscape characterized by shifting investment flows and projected fluctuations in GDP. Net foreign direct investment (FDI) fell by 19.5% year-on-year to approximately $5.09 billion in the second quarter of 2026, driven by a decrease in inward investment and an increase in outward flows. This decline is attributed to regional geopolitical tensions and maritime disruptions.

The Saudi Ministry of Finance projects a 3.6% contraction in GDP for 2026, primarily due to a 21.8% decline in oil-related activities. However, a significant recovery is anticipated in 2027, with growth expected to reach 12.8%. The government is targeting a budget deficit of 3.6% for the 2027 fiscal year while continuing to implement Vision 2030 reforms to diversify the economy.

On the labor market, the total unemployment rate decreased to 3.0% by the end of Q2 2026. The unemployment rate for Saudi nationals stood at 6.5%, a decrease from 6.8% in the same period the previous year. In the real estate sector, Riyadh saw high activity with over one million rental transactions totaling nearly 31.88 billion riyals during the first eight months of 2026. Additionally, weekly point-of-sale transactions across the Kingdom reached over 243 million operations, valued at approximately 13.37 billion riyals in late September 2026.