Saudi Arabia’s non-oil sector showed increased resilience in the third quarter of 2026, expanding by 1.9 percent compared to the same period last year, according to preliminary data released by the General Authority for Statistics (GASTAT). This growth marked an acceleration from the 0.8 percent increase recorded in the second quarter and helped partially offset a continued contraction in the overall economy.
The Kingdom’s real gross domestic product (GDP) declined by 3.8 percent year on year in the July-September quarter, an improvement from a 4.7 percent contraction in the previous quarter. The overall economic downturn primarily reflected a sharp decline in oil-related activities, which fell 20.4 percent annually, though this was a moderation from the 24.8 percent drop recorded in the second quarter. Government activities also declined by 2.7 percent in the quarter, reversing a modest 0.9 percent expansion earlier in the year.
Oil sector performance was a significant drag on growth, subtracting 4.7 percentage points from the real GDP change, GASTAT said. Meanwhile, non-oil sectors contributed positively, adding 1.1 percentage points to annual GDP growth, along with a minor 0.1 percentage point contribution from net taxes on products. Government activities reduced GDP growth by 0.4 percentage points.
On a quarterly, seasonally adjusted basis, Saudi Arabia’s economy expanded by 1.3 percent from the second quarter, reversing a sharp 4.8 percent decline. Within this growth, oil activities rebounded by 5.7 percent quarter on quarter, while non-oil output rose 0.6 percent after falling in the previous quarter. Government services, however, continued to contract, declining 1.2 percent.
The challenges facing the Saudi economy come amid ongoing regional instability linked to the conflict triggered by U.S. and Israeli strikes on Iran in late February. These events disrupted shipping through the Strait of Hormuz, a critical maritime route for global oil and gas supplies, contributing to volatility across energy markets and regional trade flows.
Business sentiment in the non-oil private sector showed signs of improvement during the quarter. According to the government’s DataSaudi platform, the Purchasing Managers’ Index (PMI) climbed to 55.3 in September from 53.8 in August. A PMI reading above 50 indicates an expansion in business activity compared to the previous month.
Looking ahead, the International Monetary Fund’s (IMF) October World Economic Outlook projects the Saudi economy to contract by 3.3 percent in 2026 before rebounding sharply with 7.9 percent growth in 2027. The IMF attributed the outlook to ongoing disruptions in the Strait of Hormuz and expects recovery as production, exports, and logistics gradually stabilize. Saudi Arabia’s economic performance is expected to be less severely impacted relative to neighboring energy exporters due to its more diversified export infrastructure. Other Gulf countries such as Bahrain, Iraq, Kuwait, and Qatar are anticipated to face more pronounced contractions this year, followed by substantial recoveries next year.
GASTAT emphasized that its third-quarter estimates are preliminary and subject to revisions as more comprehensive data becomes available. Its classification distinguishes non-oil activities from oil production, refining, and government services, underscoring the Kingdom’s efforts to diversify its economic base beyond hydrocarbons.