About 60% of the government's revenues still comes from selling crude. Oil accounted for 36% of GDP in 2016 and 26% in 2024. The oil price needed to balance the budget rose from $82 a barrel in 2021 to $96 in 2024; the actual price averaged about $80 that year. Public debt stood at 13% of GDP in 2016 and 30% in 2024. Saudi Arabia overtook China as the biggest emerging-market issuer of dollar-denominated bonds.
A fifth of local banks' loans are now made to the public sector, up from less than a tenth in 2015. Rising loan-to-deposit ratios are forcing banks to borrow commercially to meet regulatory requirements, pushing up the rates at which they can lend.
In the first quarter of 2025 the budget deficit already exceeded half of the predicted annual shortfall. Declining export revenues and surging construction-related imports drove the current account into deficit in 2024.
Saudi Arabia and the United Arab Emirates together hold 3-4m barrels a day of spare oil-production capacity. The kingdom operates an east-west pipeline with a capacity of 5m b/d—roughly half the crude it produces—allowing it to bypass the Strait of Hormuz and export from Yanbu, its Red Sea terminal. By contrast, 85% of Iraq's oil exports, and all of Bahrain's, Kuwait's and Qatar's, have no route to market other than the strait.
On May 3rd 2025 Saudi Arabia told OPEC it would no longer restrain production to compensate for members exceeding their quotas, and would instead open the taps to regain market share. Brent crude fell to around $60 a barrel. The move was aimed at punishing Iraq, Kazakhstan and the United Arab Emirates, which had persistently overshot their quotas. Saudi Arabia is betting it can cope better with low prices than the cheaters, thanks to its sovereign fund and easy access to bond markets.
Saudi Arabia was once a financier and exporter of jihadism. In 2015, after his father King Salman ascended the throne, MBS began a disastrous war in Yemen against the Houthis. In 2017 the kingdom blockaded neighbouring Qatar. In 2018 came the murder of Jamal Khashoggi, a journalist and dissident, on orders of the Saudi regime.
Adel al-Jubeir, the first commoner to serve as foreign minister since 1962, was little more than a front man for the crown prince's hawkish impulses. Faisal bin Farhan al-Saud, who replaced him in 2019, has been a moderating influence; as a prince himself, he has more room to shape policy.
Saudi Arabia no longer sponsors terrorism. It now counsels other countries to wind down their conflict with the Houthis. Along with Qatar, it has helped pay off Syria's $15m debt to the World Bank, and promised to invest in the country if American sanctions are lifted. Saudi Arabia has hosted talks aimed at bringing a ceasefire to Ukraine. It ended its war in Yemen and its feud with Qatar, and initiated a rapprochement with Iran. MBS advises dealmaking with Iran and an end to the war in Gaza.
In 2020-24 Saudi Arabia was the world's fourth-largest arms importer, after Ukraine, India and Qatar. America is its largest supplier.
The American-Saudi relationship dates to 1945 and has been transactional from the start: the Saudis kept oil flowing; America pledged to protect the kingdom. The kingdom's annual GDP is roughly $1trn and its defence budget is about $78bn.
Donald Trump landed in Saudi Arabia on May 13th 2025 for the opening state visit of his second term—a reprise of his very first state visit eight years earlier. The kingdom signed a package of deals said to be worth $600bn, including an arms deal valued at $142bn—almost twice its $78bn defence budget—though large chunks may never materialise. Trump praised "safe and orderly" autocracies and assailed American "interventionists" who had "wrecked" the region. He urged Saudi Arabia to join the Abraham accords but told them to do it "in your own time". King Salman was a curious omission from the schedule, raising questions about his health. MBS drove Trump to dinner in a golf cart.
Muhammad bin Salman, the crown prince and de facto ruler, has been trying for a decade to reduce the economy's dependence on oil and the state through a programme called Vision 2030. By 2030 the government will have spent almost $3trn on the programme. The plan encompasses "giga-projects" originally budgeted at nearly $879bn by 2030, including a futuristic "linear city" at Neom, a ski village, 50 luxury hotels along the Red Sea and the world's biggest building in Riyadh—a cube-shaped skyscraper known as the Mukaab. With oil prices stubbornly low, many of the flashiest projects are being scaled back. In early 2026 the kingdom halted work on the Mukaab after warnings it would collapse under its own weight. Construction has also largely stopped on The Line, the $500bn-plus linear city. In March 2026, weeks into the Gulf conflict, the kingdom cancelled some contracts for Trojena, a desert ski resort, and The Line; big write-downs are inevitable for the PIF, which has backed many of these initiatives. The 2029 Asian Winter Games were moved to Kazakhstan because the Trojena ski resort will not be ready on time. Authorities now promise a tighter focus on tourism, manufacturing and logistics. More than 600 packages of reforms have been initiated.
The Public Investment Fund (PIF), the kingdom's sovereign-wealth fund, owns Ma'aden, a mining company hoping to start exploiting bauxite reserves soon and already extracting gold. PIF annual spending is due to rise from $40bn to $70bn (nearly 7% of GDP). Officials and financiers say the PIF has been elbowing private investors aside and funding projects that do not need public support, driving up valuations and diminishing returns.
On April 15th 2026 the PIF unveiled a new five-year strategy, drawn up before the Gulf war began. Its boss, Yasir Al-Rumayyan, told an investment jamboree in Miami that the fund was seeking to attract more foreign capital: "In the past, we tried to bring Saudi to the world. Now we are in a stage where we want to bring the world to Saudi." Given the war, the various projects' stumbles and reports of foreign contractors retreating from Gulf projects, the pitch is a hard sell. Mr Rumayyan stressed the PIF remains committed to its global investments: "We measure our returns not in quarters, but in decades."
The PIF led a consortium that in September 2025 agreed to take Electronic Arts, an American video-game developer, private for $55bn—the biggest leveraged buy-out ever. The crown prince is an avid gamer; the fund's properties include Newcastle United and a minority stake in Take-Two, another developer.
The PIF has endowed Savvy Games Group, a state-owned enterprise, with a $38bn war chest to turn Saudi Arabia into a centre of gaming. Savvy bought Scopely, an American developer whose "Monopoly Go!" has earned more than $5bn since its 2023 launch, and acquired the gaming arm of Niantic (maker of the Pokémon mobile games). It also has a large stake and board seat in Embracer, a Swedish firm which owns titles including "Tomb Raider". The PIF itself is one of the three largest shareholders in Japan's Nintendo, Capcom and Koei, South Korea's Nexon and NCSoft, and America's Take-Two. It is among the five largest holders of Japan's Toei and Square Enix, where it also has a board seat. Excluding EA, the PIF's gaming holdings total $11.7bn.
In 2022 Savvy bought ESL and FACEIT, a pair of e-sports companies, for a combined $1.5bn, and holds a 30% share in Hero Esports, a Chinese company backed by Tencent. Savvy says it controls 40% of the global e-sports market. Saudi Arabia hosts an Esports World Cup in Riyadh; in 2025 some 250,000 tickets were sold and the event racked up 750m online streams. MiSK Foundation, a non-profit organisation founded and chaired by MBS, majority-owns SNK, the Japanese developer of "Fatal Fury". Vision 2030 promises 39,000 jobs in gaming by that year.
The PIF has a goal to produce 500,000 electric vehicles a year by 2030. By the end of 2023 the kingdom's sole car factory had reassembled just 800 vehicles in total using kits imported from America. PIF has entered joint ventures with Chinese firms such as LONGi to develop solar projects. Vedanta, an Indian firm, plans to invest $2bn in copper-processing facilities.
The Public Investment Fund is responsible for about a tenth of non-oil GDP. Saudi Arabia imports three times more non-oil goods and services than it exports; in 2024 it received less foreign private-sector investment, as a share of GDP, than the average country in the region. Foreign direct investment fell in 2024 compared with the year before and would need to more than double as a share of GDP to reach the 2030 target. In 2023 the kingdom collected less tax, as a share of GDP, than an average low-income country. On August 4th 2025 the IMF revised its non-oil growth estimate for 2023 upward, from 3.8% to 5.8%, after looking at more industries; it nonetheless reckons non-oil growth will stay below 3.5% for the next two years.
Vision 2030 is meant to steer Saudis away from state sinecures and into the private sector. At the beginning of the programme the average Saudi worker took home 10,045 rials ($2,679) in monthly pay; nine years later the mean wage is 11,197 rials, an 11% increase that has not kept pace with cumulative inflation of slightly more than 17%. The Gulf Co-operation Council decided in 2015 to introduce a uniform 5% value-added tax; Saudi Arabia imposed one in 2018, then tripled it during the covid-19 pandemic—ostensibly a temporary measure, never reversed. Subsidies on electricity, fuel and water have been slashed. For young workers, the retirement age has increased from 58 to 65.
Female employment has surged: in 2016 just 19% of the female labour force was employed; by 2025 that figure had climbed above 34%. Women still earn less than men, and the wage gap has grown, in part because women have piled into service jobs. The average Saudi family earned 14,823 rials a month in 2018 and 18,056 rials in 2025.
The influx of both Saudis and expats into Riyadh has sent house prices soaring. Rents in the capital are up by more than 50% since 2020; prices of flats have doubled to more than 6,000 rials per square metre. In 2025 MBS imposed a five-year freeze on rents in the capital. Around two-thirds of Saudi families now own their homes. Before Vision 2030 Jeddah was the kingdom's commercial capital; Riyadh was a sleepy seat of government. The crown prince is pouring billions into the capital, investing in everything from parks and universities to a financial district and a world-class airport. Prices in Jeddah and the eastern province have barely budged.
Twenty years ago, religious police enforced shop closures for five daily prayers, required women to be accompanied by a male relative, and banned mingling of the sexes. There were no cinemas or concerts. Since MBS sidelined the religious police, women have gained far more freedom to move around, work and start businesses. Discriminating against women in hiring or pay became illegal. Seven years ago girls were banned from playing sport in public; by 2025, 70,000 take part in the school soccer league. Less than a decade ago, half the country's population—its women—were shut out of public life and much of the labour market. Cinemas and concerts were banned. The religious police have been disbanded. Women's workforce participation rose from 20% to 36%, fastest among those with only high-school diplomas. The number of dual-income families has grown.
The share of household spending on eating out, recreation and culture rose from 12% in 2017 to nearly 20% in 2024. Tourism rose from around 60m overnight stays in 2016 to more than 100m in 2023, mostly from Saudis themselves. Education has been modernised, with religious-education hours in middle school cut by 60%. Schoolchildren across the Middle East score well below the OECD average in maths, reading and science; Saudi pupils perform worse than their Emirati or Qatari counterparts. The kingdom has rolled out an AI curriculum for 6m schoolchildren to build a domestic pipeline of talent. Its sovereign-wealth fund is pouring money into data centres and model-building, with partnerships with companies including Nvidia.
In 2019 Saudi Arabia scrapped a rule that required foreign women to wear the abaya, a long cloak. The law now forbids only "indecent clothing" for men and women, though enforcement varies: in al-Ula, a resort town in the north-west, influencers snap selfies in bikinis, while in Riyadh women can still receive fines for knee-length skirts.
Saudi Arabia had been dry since the 1950s. In January 2026 the kingdom opened its first alcohol shop, catering exclusively to non-Muslim diplomats with a permit from the foreign ministry. In November 2025 access was expanded to expats with long-term residency or salaries above 50,000 rials a month—a reminder of the enormous wage gap between foreigners and locals, as few Saudis dream of earning so much. The shop is not listed on Google Maps; no photos are allowed inside, and phones go into sealed bags. A bottle of Johnny Walker Black Label costs 464 rials, two to three times the price in a British supermarket but a third of what it used to cost on Riyadh's black market. A points-based quota system allows up to 200 bottles of wine or 50 litres of whisky per month. Some hotels in tourist areas are said to be preparing to serve beer and wine.
On September 17th 2025 Saudi Arabia and Pakistan signed a mutual-defence pact in which "any aggression against either country shall be considered an aggression against both." Saudi officials described it as a "comprehensive defensive agreement that encompasses all military means", implying it covers Pakistan's approximately 170 nuclear warheads—a first for a nuclear state outside the five NPT-recognised powers. The deal could affect the "strategic calculus of Iran" and "other regional players", according to Jamal al-Harbi, an official at the Saudi embassy in Islamabad. The deal builds on decades of co-operation: in 1998 Saudi Arabia offered Pakistan more than 50,000 barrels per day of free oil to help it match India's nuclear tests; in 1999 Prince Sultan bin Abdulaziz visited Pakistan's uranium-enrichment and missile-assembly sites. Around 2,000 Pakistani troops remain in the kingdom today.
The pact was likely accelerated by Israel's air strikes on Hamas leaders in Doha on September 9th and by Iran's earlier missiles at an American air base there. Saudi Arabia's sovereign-wealth fund has pledged to invest $100bn in India, and Narendra Modi has visited the kingdom three times, most recently in April 2025; the pact with Pakistan signals the kingdom is not in India's pocket. Al-Harbi publicly warned that the deal "may heighten India's caution in dealing with Pakistan."
Saudi Arabia and its Gulf neighbours worry about future Israeli or American strikes on Iran's nuclear facilities, which seem inevitable without a new nuclear deal. Gulf rulers fear Iran could adopt a North Korean strategy—deterring Israel and America by pointing missiles not at Tel Aviv but at Dammam, Doha or Dubai. This fear of a cornered, isolated Iran may make Saudi Arabia more reluctant to normalise ties with Israel through the Abraham accords, despite Donald Trump's hopes.
Saudi Arabia is also nervous about renewing its war against the Houthis. A loss of Iranian support would be a blow to the group, but it still has tens of thousands of fighters, steady revenue and has figured out how to produce some crude missiles and drones indigenously.
On November 18th 2025 Donald Trump welcomed MBS with full military honours, declaring Saudi Arabia a "major non-NATO ally". They signed deals for investment, arms sales and nuclear co-operation. The kingdom wants American firms to build nuclear reactors to meet growing energy demand, but a formal "123 agreement" (named after the relevant section of America's export-control laws) has not yet been signed. Many lawmakers want Saudi Arabia to swear off uranium enrichment, as the UAE did in 2009; the Saudis want to possess that capability. Some officials have mooted a Saudi-owned enrichment facility in America as a compromise.
Saudi Arabia also wants to buy dozens of F-35 fighter jets, requiring congressional approval. Lawmakers from both parties worry about what this would mean for Israel's military edge. The aircraft are unlikely to arrive before the end of the decade; Israeli officials are not panicked, since by then Israel will have been flying the jets for 15 years. However, Israel is unhappy that Trump bypassed the traditional Pentagon-to-Pentagon process for clearing advanced weapons sales to Arab countries.
MBS pledged nearly $1trn in American investment, up from $600bn pledged during Trump's May visit to Riyadh. That is larger than the entire sovereign-wealth fund; the kingdom does not have a spare trillion dollars.
The visit was also a rehabilitation in Washington. After the Khashoggi murder in 2018 poisoned relations and Joe Biden promised to make the prince a "pariah", the Saudis have adopted a more pragmatic foreign policy. The kingdom is pitching itself to Americans as a supplier of critical minerals to break dependence on China. MBS told Trump he wanted to join the Abraham accords but would require "a clear path to a two-state solution"—which Binyamin Netanyahu will not consider.
Saudi Arabia initially cautioned America against striking Iran in early February 2026, saying it would not allow American planes to use its airspace. But its position grew more nuanced: it would prefer America to hold fire, but if an attack is going to happen, the kingdom wants to be part of the planning. On January 30th Prince Khalid bin Salman, the defence minister, is reported to have told American officials that if an attack does not happen "it will only embolden the [Iranian] regime." Both Israel and Saudi Arabia worried that a deal—especially one including relief from crippling American sanctions—could offer the Iranian regime a lifeline at its most vulnerable.
During the April 2026 ceasefire, Iran struck the Saudi east-west pipeline carrying 7m barrels a day of oil to the Red Sea, bypassing the Strait of Hormuz—demonstrating that alternative export routes are just as vulnerable to Iranian drones and missiles as oil tankers. Saudi Arabia and Pakistan signed a defence pact in September 2025; South Korea rushed an air-defence system to the UAE during the war. Gulf states' decades of relative peace, in which they thought themselves an entrepot immune from the Middle East's conflicts, have been upended.
Saudi Arabia's AI strategy became a national priority in May 2025. A new state-backed company, Humain, chaired by MBS, is centralising the effort. The Al Shuaiba solar farm, two hours south of Jeddah on the Red Sea coast, blankets 50 square kilometres of desert and produces 600 megawatts of electricity at 3.9 Saudi halalas (just over one American cent) per kilowatt-hour—nearly a twentieth of the cost of Britain's planned Hinkley Point C nuclear plant. Humain's strategy is to use cheap electricity to undercut rival AI providers on the cost of inference; it was able to sell output tokens for around half market price. In November 2025 MBS's visit to Washington unlocked a licence to import 35,000 top-flight Nvidia chips costing around $1bn; AirTrunk, a data-centre builder, signed a $3bn deal with Humain. ALLAM, an Arabic-language AI model, has been provided to civil servants.
In 2017-18, MBS held many rich Saudis hostage in a luxury hotel in Riyadh until they handed over large sums to the government. Political connections remain vital to doing business in the kingdom, and payment disputes and delays are common on government contracts. A new law on investment defining contractual rights came into force recently. Half of Saudi men work as bureaucrats.
Donald Trump imposed only the minimum 10% tariff on Saudi goods, well below the rates for most countries and for China.
Saudi Arabia and the UAE have been close allies for decades—both leading members of the GCC and OPEC. They fought together for years in Yemen against the Houthis. The UAE is Saudi Arabia's fifth-largest export market for goods; Saudi Arabia ranks ninth for the UAE. Bilateral trade is worth $31bn a year. Flights between Dubai and Riyadh are the world's seventh-busiest international route. Saudi Arabia has 20m citizens to the UAE's 1m.
A turning point came in 2023, when Sudan tipped into civil war. The Saudis backed Sudan's army; the UAE sent money and arms to the RSF. A dispute over oil-production quotas paralysed OPEC for several months in 2021. Their interests in Yemen began to diverge in 2018.
In December 2025 the Southern Transitional Council, Emirati-backed secessionists, unexpectedly seized territory in Yemen from Saudi-backed forces. The Saudis forced the STC to retreat and expelled the UAE from Yemen, then bombed an Emirati weapons shipment.
Top officials barely speak. State-backed propagandists have been unleashed. Saudi-linked social-media accounts have spread unsubstantiated rumours about the health of Muhammad bin Zayed, the UAE's president. Saudi commentators have tried to drive a wedge between Abu Dhabi and the leaders of the UAE's other six emirates. UAE-based firms report new bureaucratic obstacles in the kingdom: lorries held up at the border, employees unable to get Saudi business visas. Emirati firms pulled out of a big defence expo in Riyadh in February 2026. A Saudi commentator close to the royals described the UAE as a rebellious "younger sibling".
Qatar, in an ironic twist, is now trying to mediate between its former blockaders: on February 4th 2026 its emir met Khalid bin Salman, the Saudi defence minister and MBS's brother; ten days later he flew to Abu Dhabi to see MBZ. Bahrain, Egypt and Turkey are also trying to help. Donald Trump told reporters on February 16th: "I can settle it very easily," but has been unwilling to wade into a dispute between two allies who have enriched his family. Lindsey Graham, a Republican senator, said on February 13th: "Knock it off, Saudi Arabia."
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