Saudi Arabia Sees Widest Deficit Since 2018 on More Spending

dilt)(jxdqhktcklrcf4po)n_media_dl_1.png Saudi Ministry of Finance

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(Bloomberg) — Saudi Arabia’s fiscal deficit widened in the first quarter to the highest level since 2018 as spending on projects to diversify the economy continued to rise.

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The kingdom posted a budget shortfall of 125.7 billion riyals ($33.5 billion), according to the finance ministry. That compares with a deficit of 95 billion riyals in the last three months of 2025 and was more than double the figure from a year earlier.

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Oil revenue dipped around 3% year-on-year for the first quarter, while expenditure rose roughly 20% to the equivalent of $103 billion.

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The figures are a fresh signal of some of the pressures the Middle East’s largest economy is facing. Gross domestic product expanded 2.8% year-on-year in the first quarter, the slowest pace since mid-2024. 

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The financial impact from the Iran war, which began in late February, will likely show up more clearly in the second quarter data. 

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The conflict is now in its third month and in a fragile ceasefire. It has disrupted regional economies, including Saudi Arabia’s, by damaging their infrastructure and closing off the Strait of Hormuz for their energy exports.

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Still, Saudi Arabia has managed to divert the bulk of its oil exports to the Red Sea port of Yanbu.

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If prices remain elevated — Brent is up more than 80% this year to around $111 a barrel — and export levels are maintained, the government may even be able to post a smaller shortfall for the full year than was predicted before the war, according to some economists.

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Saudi Arabia is earning roughly 10% more in oil revenue today than before the conflict thanks to the higher prices and ability to bypass Hormuz for most of its exports, Goldman Sachs Group Ltd. estimates.

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“We expect oil revenue to strengthen from 1Q onwards, though there is still a lot of uncertainty with the duration of the conflict,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank.

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Should oil average about $85 a barrel, the country’s 2026 shortfall could be around 4% of GDP compared with a 5% estimate prior to the war, she said.

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Saudi Arabia has been running budget deficits since late 2022, prompting it to increase borrowing from international bond markets and also use alternative means of financing, including private markets.

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The kingdom’s National Debt Management Center announced on Tuesday the completion of its 2026 borrowing plan, having secured approximately 90% of its needs prior to the conflict.

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“Should the ongoing coordination with the Ministry of Finance identify a need for additional financing, NDMC intends to leverage private channels and local markets as the primary funding sources,” it said in a statement.

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JPMorgan Chase & Co. said in April it plans to add Saudi local-currency bonds to its widely followed benchmark emerging-market index in early 2027. The listing stands to improve the liquidity of government securities and attract more passive foreign portfolio investment.

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(Updates with bank economist’s comment.)

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