Wall Street Analysts Clash With Riyadh Over Saudi Arabia’s Deficit Outlook
As the kingdom projects a 3.3 percent-of-GDP deficit in 2026, some investors warn fiscal risks may tempere growth expectations
Saudi Arabia has adopted a 2026 budget forecasting a deficit of 165 billion riyals — roughly 3.3 percent of gross domestic product — as it continues heavy spending under Vision 2030 and seeks to diversify away from hydrocarbons.
The government plans to channel resources into industry, logistics, and social services, signalling a sustained commitment to structural transformation through elevated public investment.
On the surface, Riyadh presents the deficit as a manageable step in a carefully sequenced fiscal transition.
But a rising chorus of Wall Street-based economists and global credit analysts disagree.
They caution that continued reliance on borrowing, combined with persistent volatility in oil prices, could weigh on the kingdom’s borrowing costs, delay planned reforms and undermine investor confidence.
According to recent assessments by credit-rating agencies, structural deficits of this magnitude — especially after the kingdom recorded a 5.3 percent-of-GDP shortfall in 2025 — raise questions about the sustainability of debt roll-overs.
Some market analysts argue that without stronger non-oil revenue increases or significant spending reforms, Saudi Arabia may need to revisit scheduled megaprojects or delay parts of its reform agenda.
Proponents of the government’s approach counter that the deficit is a “policy tool, not a crisis.” They point to broad new investments in infrastructure, housing, healthcare and social programmes as foundational for long-term growth.
They argue that as non-oil activity expands and the non-oil private sector deepens, fiscal shortfalls will shrink — and the return on current investments will justify the borrowing.
With a global economic environment in flux, the rift between Wall Street’s caution and Riyadh’s optimism underscores a key tension: whether Saudi Arabia’s fiscal strategy represents bold transition or risky overextension.
The coming months of oil-price uncertainty and interest-rate volatility may determine whose view prevails.
For now, the kingdom remains committed to spending — positioning its deficit not as a weakness, but as a deliberate investment in its economic future.
The government plans to channel resources into industry, logistics, and social services, signalling a sustained commitment to structural transformation through elevated public investment.
On the surface, Riyadh presents the deficit as a manageable step in a carefully sequenced fiscal transition.
But a rising chorus of Wall Street-based economists and global credit analysts disagree.
They caution that continued reliance on borrowing, combined with persistent volatility in oil prices, could weigh on the kingdom’s borrowing costs, delay planned reforms and undermine investor confidence.
According to recent assessments by credit-rating agencies, structural deficits of this magnitude — especially after the kingdom recorded a 5.3 percent-of-GDP shortfall in 2025 — raise questions about the sustainability of debt roll-overs.
Some market analysts argue that without stronger non-oil revenue increases or significant spending reforms, Saudi Arabia may need to revisit scheduled megaprojects or delay parts of its reform agenda.
Proponents of the government’s approach counter that the deficit is a “policy tool, not a crisis.” They point to broad new investments in infrastructure, housing, healthcare and social programmes as foundational for long-term growth.
They argue that as non-oil activity expands and the non-oil private sector deepens, fiscal shortfalls will shrink — and the return on current investments will justify the borrowing.
With a global economic environment in flux, the rift between Wall Street’s caution and Riyadh’s optimism underscores a key tension: whether Saudi Arabia’s fiscal strategy represents bold transition or risky overextension.
The coming months of oil-price uncertainty and interest-rate volatility may determine whose view prevails.
For now, the kingdom remains committed to spending — positioning its deficit not as a weakness, but as a deliberate investment in its economic future.
