Impact of US tariffs on Saudi Arabia minimal, according to IMF estimate
Saudi Arabia, the world's top oil exporter, has shown remarkable resilience in the face of economic challenges, including the recent US tariffs and global uncertainties. According to the International Monetary Fund (IMF), the impact of these tariffs on Saudi Arabia's economy is close to zero.
The majority of Saudi Arabia's exports to the US are oil products, which are exempt from these tariffs. Non-oil exports subject to tariffs represent only about 3-4% of total exports. This limited exposure means the tariffs have minimal direct effect on Saudi exports and economic growth.
Despite this, Saudi Arabia's economy has continued to thrive. The IMF highlights several key factors supporting this growth:
- Robust Expansion of Non-Oil Sector: In 2024, the non-oil sector grew by 4.5%, driven by retail, hospitality, and construction.
- Controlled Inflation and Low Unemployment: Saudi Arabia has experienced controlled inflation and record-low unemployment levels, including significant reductions in youth and female unemployment.
- Structural Reforms: The IMF praises the structural reforms under Vision 2030, aimed at diversifying the economy beyond oil reliance.
- Strong Banking Sector: The Saudi banking sector maintains robust balance sheets with high capitalization, profitability, and low non-performing loans.
The IMF projects Saudi Arabia’s overall GDP growth at about 3.6% in 2025 and 3.9% in 2026, supported by phasing out OPEC production cuts and ongoing non-oil sector expansion.
However, risks remain in the near term, including weaker oil demand due to global trade tensions, lower government spending, and regional security risks. The IMF also emphasises the need for a gradual fiscal consolidation to achieve intergenerational equity, which could be achieved through broader tax policy reforms, wage bill containment, energy subsidy reform, better targeting social safety nets, and streamlining non-essential expenditures.
Despite these challenges, the IMF remains optimistic about Saudi Arabia's future. The IMF acknowledges that technology will play a vital role in Saudi Arabia's future economy and agrees on Saudi Arabia's strong economic performance and a favourable outlook, praising appropriate macroeconomic policies, strong buffers, and reform momentum. The IMF expects Saudi Arabia's non-oil growth to be above 3.5% over the medium term, and consumer prices to remain contained. Unemployment among Saudi nationals has reached a record low, with the jobless rate among youth and women halved over four years. The current account deficit is projected to persist over the medium term at around 3%.
In summary, US tariffs have negligible direct impact on Saudi Arabia’s exports and economy, while Saudi Arabia's economic diversification and strong macroeconomic fundamentals sustain resilience against global shocks including trade tensions and declining oil revenues.
- Saudi Arabia, despite US tariffs and global uncertainties, demonstrated resilience in economic growth due to robust expansion of the non-oil sector, controlled inflation, low unemployment, structural reforms, and a strong banking sector.
- In 2024, the non-oil sector of Saudi Arabia saw a growth of 4.5%, boosted by retail, hospitality, and construction.
- Saudi Arabia experienced controlled inflation and record-low unemployment levels, with significant reductions in youth and female unemployment.
- The IMF applauds the structural reforms under Vision 2030, intended to diversify the economy beyond oil reliance.
- The Saudi banking sector has healthy balance sheets, with high capitalization, profitability, and minimal non-performing loans.
- The IMF predicts Saudi Arabia’s overall GDP growth at approximately 3.6% in 2025 and 3.9% in 2026, bolstered by the phasing out of OPEC production cuts and continued non-oil sector expansion.
- Technology is expected to significantly contribute to Saudi Arabia's future economy, while the IMF recognizes the country's strong economic performance and favorable outlook, praising appropriate macroeconomic policies, strong buffers, and ongoing reform momentum.
