Saudi Arabia Government Consumption

Economic growth decelerates in the first quarter of 2026

GDP growth exceeds estimates: Saudi Arabia's GDP expanded 3.0% in annual terms in Q1, following a 5.2% expansion in the previous quarter. While this marked the weakest reading since Q2 2024, it remained above the country’s three-year average and overshot market estimates. On a seasonally adjusted quarter-on-quarter basis, the economy contracted 1.2% in Q1, following a 1.3% expansion in the prior quarter. The quarterly decline was primarily driven by a drop in oil activities.

Drivers: Relative to the previous quarter's data, readings in Q1 softened for exports of goods and services (+1.4% in annual terms vs +11.2% in Q4) and imports of goods and services (-5.5% vs -0.3% in Q4). In contrast, readings strengthened for private consumption (+5.3% vs +3.2% in Q4), government consumption (+11.3% vs -8.5% in Q4) and fixed investment (+3.9% vs -4.9% in Q4).

Panelist insight: Commenting on the reading, Farouk Soussa, analyst at Goldman Sachs, stated: “A detailed breakdown of the numbers reveal a surge in government final consumption on a yoy basis and government capital expenditure. […] The surge in government spending is consistent with the Q1 fiscal data which showed a 20% increase in government spending yoy. Exports were up modestly on a yoy basis, despite our estimate of a ~45% decline in oil exports volumes in March due to the closure of the Strait of Hormuz. Imports, however, declined […], reflecting mainly supply chain disruptions, in our opinion (45% of Saudi imports come via the Strait of Hormuz). Offsetting the growth in government spending and net exports was a sharp decline in inventories (-89%yoy, -88%qoq), consistent with the decline in imports.” On the GDP outlook, Simon Williams, chief economist at HSBC, commented: “For 2026 as a whole, we see growth averaging around 2% – some 3ppt below the five-year average and well down on our pre-crisis projection. Nevertheless, the growth forecast is stronger than our expectations for the Middle East as a whole and masks a positive growth profile that sees the economy contracting in the first half of the year before returning to growth in H2 as the impact of the crisis fades. […] The forecast is premised on a sharp rise in oil exports as traffic through the Strait of Hormuz normalises and OPEC keeps production quotas loose amid global inventory restocking. But we also look for non-oil activity to firm as confidence recovers and supply-chain disruption fades.”

How should you choose a forecaster if some are too optimistic while others are too pessimistic? FocusEconomics collects Saudi Arabian government consumption projections for the next ten years from a panel of 8 analysts at the leading national, regional and global forecast institutions. These projections are then validated by our in-house team of economists and data analysts and averaged to provide one Consensus Forecast you can rely on for each indicator. By averaging all forecasts, upside and downside forecasting errors tend to cancel each other out, leading to the most reliable government consumption forecast available for Saudi Arabian government consumption.

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