On July 29, 2026, the International Monetary Fund published its final statement on the Article IV consultations with the Kingdom (Statement No. 26/267), following a meeting of its Executive Board on July 22. Concurrently, the General Authority for Statistics released its preliminary estimates for second-quarter output, completing the economic picture for the first half of the year. The comparison between the two sides — the Fund's annual forecast and the actual quarterly performance — reveals the true story of the year: a non-oil economy maintaining its growth, contrasted with a sharp decline in oil activity imposed by shipping disruptions.

First: What did the IMF predict?

The Fund painted a picture of an economy entering 2026 with strong momentum after a growth of 4.6% in 2025, driven by the gradual lifting of OPEC+ production cuts and strong domestic demand. However, the Fund reduced its overall growth forecast for 2026 to only 1.7%, with non-oil growth slowing to 2.6%, before the economy is expected to accelerate again to 5.5% in 2027 as navigation returns to normal.

The Fund attributed this slowdown to the war in the Middle East and the near halt of shipping through the Strait of Hormuz, which disrupted activity and reduced trade — including oil exports — and undermined confidence. It noted that redirecting oil through the “East-West” pipeline to Red Sea ports limited the drop in delivered quantities, while rising prices compensated for volume losses and added to them, generating exceptional gains in oil revenues that alleviated the current account and public finance deficits.

The Executive Board considered a modest reduction in the non-oil primary deficit in 2026 to be appropriate, emphasizing that any financial support should be temporary, targeted, and transparent, confirming that the Kingdom has sufficient fiscal space to ease its policy stance if the shock intensifies.

Second: What do the official figures for the first half say?

Here lies the essence of the reading. While the Fund provides an annual forecast, the data from the General Authority for Statistics reveals the actual quarterly performance achieved on the ground:

Q1 2026: Real GDP grew by 3.0% year-on-year (revised up from 2.8% in the initial estimate), supported evenly by oil activities +2.9%, non-oil activities +2.9%, and government activities +1.5%. However, the economy contracted on a seasonally adjusted quarterly basis by 1.2%, marking the first sign of the impact on oil activity.

Q2 2026: Here, the shock became clear. The GDP contracted by 4.8% year-on-year — the first contraction since Q4 2023 — due to a 24.7% drop in oil activities. In contrast, non-oil activities continued to grow by 0.6%, and government activities grew by 0.9%. On a seasonally adjusted quarterly basis, output fell by 4.9%, with oil activity dropping by 21.5%.

In terms of contribution to growth, oil activities subtracted 5.4 percentage points from growth in Q2, while non-oil activities added 0.4 points, and government and net taxes on products each added 0.1 points — illustrating that the overall contraction was a purely oil story, not a general activity crisis.

Actual quarterly performance of GDP — 2026

Saudi GDP Q 1 & 2 Fixed

Third: How do we reconcile the Fund's forecast with reality?

There is no contradiction between the two pictures, but rather a complement. The Fund's forecast of 1.7% for the entire year is a annual average that balances a first half affected by the Hormuz shock and a second half expected to witness a gradual recovery as navigation normalizes. The first half data — 3.0% growth followed by a 4.8% contraction — places the economy on a path that makes achieving the expected annual average contingent on the strength of recovery in the last two quarters and the trajectory of OPEC+ production.

Most importantly, the actual figures validate the Fund's core diagnosis: that the source of resilience is the non-oil economy, which remained in positive territory throughout the first half despite the oil storm. This is the true measure of success in diversification under Vision 2030; the shock hit the component that is supposed to shrink in weight, while the component intended to lead remained resilient.

IMF Forecasts — Selected Indicators 2025–2027

Saudi GDP IMF Forecast

Conclusion

The IMF presents a balanced forecast for an exceptional year, confirmed by the Authority's figures: oil activity took the hardest hit due to the Hormuz disruption, while the non-oil economy maintained its momentum. The critical question for the second half remains the speed of normalization of maritime navigation and the trajectory of oil prices and production — factors that will determine whether the annual average will touch the Fund's estimate of 1.7% or deviate from it.