Saudi Arabia’s non-oil economy continues to build resilience despite rising fiscal pressures and growing funding needs. The government recorded a SR160 billion deficit during the first half of 2026. That figure marked a 71 percent increase from the SR93 billion deficit recorded one year earlier. Meanwhile, S&P Global Ratings expects the fiscal gap to widen further this year.
S&P projects the deficit will reach 5.8 percent of GDP during 2026. However, the agency expects the gap to narrow to 3.4 percent on average through 2029. Authorities plan to adjust the pace of major Vision 2030 projects. Therefore, the changes could limit future deficits and slow government debt growth.
Economic activity also highlights the changing structure of Saudi Arabia’s economy. Non-oil activities grew 0.9 percent year on year during the second quarter. Meanwhile, real GDP declined 4.7 percent during the same period. Oil activity dropped 24.8 percent and weighed heavily on overall economic performance.
S&P said rising non-oil revenue supports Saudi Arabia’s long-term economic resilience. Furthermore, rapid digital expansion continues to create new investment opportunities. Economist Talat Hafiz also pointed to broader growth drivers across the economy. He said the Kingdom now relies less heavily on public spending alone.
At the same time, Saudi Arabia faces continued regional uncertainty. S&P expects Middle East conflict disruptions to continue into 2027. The agency also expects regional oil exports to remain below prewar levels. Nevertheless, Saudi Arabia retains substantial foreign exchange reserves to support financial stability.
Foreign exchange reserves reached $494 billion in June 2026. That amount represented 48.7 percent of Saudi Arabia’s GDP. Reserves stood near $437 billion at the end of 2024. Consequently, the increase provides additional financial support during a period of elevated spending needs.
Digital infrastructure has also become a major part of Saudi Arabia’s diversification plans. Data centers now represent an increasingly important area for infrastructure investment. Saudi Arabia had around 222 megawatts of operational data center capacity in early 2025. Moreover, industry forecasts expect capacity to expand rapidly through 2030.
Saudi Arabia could reach one gigawatt of installed data center capacity by 2030. That expansion could require between $7 billion and $9 billion in project capital. Debt could provide between $3.5 billion and $7 billion of that funding. However, these figures represent possible scenarios rather than confirmed spending plans.
Recent projects already demonstrate the growing financing requirements. DataVolt plans an initial $5 billion investment for an AI campus at Oxagon. The first phase will target 1.5 gigawatts of capacity. Meanwhile, Humain and Infra agreed on a financing framework worth up to $1.2 billion.
Saudi banks also face increasing pressure to secure additional funding sources. Public sector deposits represented 33 percent of total system deposits in June 2026. That share stood near 20 percent at the end of 2018. Therefore, banks increasingly need funding beyond traditional customer deposits.
S&P expects Saudi banks’ loan-to-deposit ratio to keep rising. The ratio reached 104 percent at the end of June 2026. As a result, banks may increasingly turn toward external funding markets. Securitization could provide another option as mortgage lending continues to expand.
Saudi Arabia’s mortgage market has now surpassed $200 billion. However, property transaction values dropped 49 percent during the second quarter. Meanwhile, banks continue exploring residential mortgage-backed sukuk and structured financing. Overall, the non-oil economy remains central to Saudi Arabia’s diversification strategy and future funding needs.
