Saudi GDP Contracts 4.8 Percent as Oil Activities Fall 24.7 Percent
Saudi Arabia’s real gross domestic product contracted 4.8 percent year on year in the second quarter of 2026, according to the flash estimate published by the General Authority for Statistics on 30 July. The entire decline came from oil activities, which fell 24.7 percent. Non-oil activities grew 0.6 percent and government activities grew 0.9 percent.
That is a sharp reversal in a single series. Oil activities had grown 10.8 percent year on year in the fourth quarter of 2025 and 2.9 percent in the first quarter of 2026 before the second-quarter fall.
The Ministry of Finance published its budget performance report for the same quarter, and the fiscal picture is close to the mirror image of the national accounts. Oil revenue rose 22 percent year on year and the deficit narrowed sharply against the first quarter of 2026. Both statements are correct, and the reason they can coexist is the subject of the second half of this article.
The arithmetic is entirely on the oil side
The contribution breakdown makes the concentration explicit. Oil activities subtracted 5.4 percentage points from headline growth. Non-oil activities added 0.4 points, government activities 0.1 and net taxes on products 0.1. Nothing outside oil moved the quarter in either direction by as much as half a percentage point.
Seasonally adjusted against the previous quarter, real GDP fell 4.9 percent, with oil activities down 21.5 percent, non-oil activities down 0.5 percent and government activities up 0.2 percent. On that basis oil subtracted 4.5 percentage points, non-oil 0.3 and net taxes 0.1, while government added a fraction.
| Activity | Y/y percent change | Contribution to growth, pp |
|---|---|---|
| Real GDP | −4.8 | — |
| Oil activities | −24.7 | −5.4 |
| Non-oil activities | +0.6 | +0.4 |
| Government activities | +0.9 | +0.1 |
| Net taxes on products | — | +0.1 |
Flash estimate, second quarter 2026. Source: General Authority for Statistics, Kingdom of Saudi Arabia.
The scale of the oil figure deserves to be stated plainly
A 24.7 percent annual fall in oil activities is a very large number, and it sits awkwardly against the OPEC Plus production path we have reported through 2026, which has been one of returning barrels to the market rather than withholding them.
The figure is internally consistent within the release. A contribution of −5.4 percentage points from a −24.7 percent change implies a weight for oil activities of around 22 percent. Chain-linked contributions do not correspond to a fixed sector share, so this is an approximation rather than a published weight, but it is the right order for Saudi Arabia and it confirms that the headline and the contribution are describing the same series. The seasonally adjusted quarterly path tells the same story, moving from small positive readings through 2025 to −6.8 percent in the first quarter of 2026 and −21.5 percent in the second.
What the flash estimate cannot settle is the composition. These are activity estimates published 30 days after the reference quarter and seasonally adjusted using the TRAMO-SEATS method, and they carry the revision risk that any 30-day estimate carries. The detailed quarterly national accounts are the confirmation to watch, and until they arrive the sensible reading is that the oil sector had a severe quarter on the Authority’s own measurement while the rest of the economy did not.
The non-oil economy has slowed but has not turned
Non-oil growth of 0.6 percent is the slowest reading in the recent series. The year-on-year path runs 5.4, 5.4, 4.9 and 4.6 percent through the four quarters of 2025, then 2.9 percent in the first quarter of 2026 and 0.6 percent in the second. That is a clear deceleration over six quarters.
It is still growth, and it is growth in the part of the economy that the diversification agenda is meant to build. Government activities also expanded, by 0.9 percent, after 1.5 percent in the first quarter. The composition of this quarter is a hydrocarbon shock passing through a non-oil economy that continued to expand rather than a broad-based contraction.
The fiscal outturn moved the other way
The Ministry of Finance published its quarterly budget performance report for the same quarter, and it points in the opposite direction to the national accounts. Revenues were SAR 338,784 million in the second quarter against expenditures of SAR 373,073 million, leaving a deficit of SAR 34,289 million. The comparison period decides how that reads. Against the first quarter of 2026, when the deficit was SAR 125,713 million, it is a sharp narrowing. Against the second quarter of 2025, when revenues of SAR 301,595 million met expenditures of SAR 336,129 million for a deficit of SAR 34,534 million, it is a narrowing of SAR 245 million, or 0.7 percent. The quarter improved on the one before it and was essentially flat on the year. The first-half deficit stands at SAR 160,002 million.
Oil revenue was the reason. It came in at SAR 185,127 million in the second quarter, an increase of 22 percent on the SAR 151,734 million of the same quarter of 2025, and reached SAR 329,848 million over the half, up 9 percent. Non-oil revenue rose 2 percent over the half to SAR 269,908 million, with taxes on goods and services up 5 percent and taxes on international trade down 13 percent. Total first-half revenue was SAR 599,756 million, 6 percent above the same period of 2025.
A 24.7 percent fall in real oil activity alongside a 22 percent rise in nominal oil revenue is not a contradiction. The national accounts measure volume; the budget records cash. Prices, receipt timing and the settlement of dividends and royalties determine the second in ways that the first does not capture, and the two series are describing different things about the same sector. It is the same price-versus-volume distinction that runs through the International Monetary Fund’s external assessment of the Kingdom.
Spending, not revenue, is the pressure point
First-half expenditure was SAR 759,757 million, an increase of 15 percent on the SAR 658,446 million of the first half of 2025, and equal to 58 percent of the full-year budget of SAR 1,312,800 million. Revenue over the same period covered 52 percent of the budgeted annual figure. Capital expenditure rose 32 percent over the half to SAR 89,660 million and compensation of employees rose 3 percent to SAR 295,428 million. Within the quarter, subsidies were up 73 percent, financing expenses up 41 percent and other expenses up 49 percent year on year.
By sector, general items rose 44 percent over the half, economic resources 24 percent and infrastructure and transportation 21 percent, against 5 percent for education and 10 percent for health and social development.
The half-year deficit of SAR 160,002 million sits against a full-year budgeted deficit of SAR 165,400 million. Six months have consumed almost the whole of the planned annual shortfall.
The Ministry financed the entire first-half deficit through borrowing, with no drawdown of government reserves. Public debt closed the half at SAR 1,684,993 million, of which SAR 1,060,090 million domestic and SAR 624,903 million external, against an opening balance of SAR 1,519,007 million. The government reserve stood at SAR 399,070 million and the current account balance at SAR 39,904 million at the end of the period.
Why it matters
The International Monetary Fund’s 2026 External Sector Report, published the same day, projects the Saudi current account deficit to narrow to 0.3 percent of GDP in 2026 as higher oil prices more than offset the effect of lower export volumes on receipts. This release is the volume side of that trade-off.
The Fund’s broader assessment provides the context in which to read the quarter. It judges the Saudi external balance sheet to remain strong, with reserves adequate on standard metrics, gross external assets of 126.2 percent of GDP and central bank net foreign assets equivalent to about 13 months of imports. A single quarter of hydrocarbon weakness meets a balance sheet built precisely for oil price and volume volatility.
For the wider Gulf, a quarter of this shape is a reminder that the headline GDP number and the diversification story can now point in opposite directions, and that the non-oil series is the one that carries information about the structural transition.
What to watch
The detailed quarterly national accounts for the second quarter are the release that will confirm or revise the flash estimate, and given the size of the oil movement the revision is worth waiting for before drawing conclusions about the full year.
On the fiscal side the question is the spending path. With 58 percent of the annual budget spent by the end of June and the annual deficit target already almost fully used, either the second-half run rate slows or the full-year outturn exceeds plan. The third-quarter budget performance report is the first test of which.
Beyond that, the third-quarter path for oil activities will show whether the second quarter was a level shift or a single-quarter effect, and the OPEC Plus production decisions through the second half are the input that determines it.
Sources
General Authority for Statistics, Kingdom of Saudi Arabia, Gross Domestic Product, Flash Estimate, Second Quarter 2026, 30 July 2026. Ministry of Finance, Kingdom of Saudi Arabia, Quarterly Budget Performance Report, Q2 of FY 2026 (1447/1448H). International Monetary Fund, 2026 External Sector Report, 30 July 2026.
