The oil-price crash is set to have far-reaching consequences for Saudi Arabia’s finances and vast economic ambitions.
The kingdom’s budget deficit may soar to $67 billion this year, according to projections shared by Goldman Sachs Group Inc. economist Farouk Soussa in an interview.
That calculation, based on oil averaging $62 a barrel in 2025, is well over double the government’s current forecast and will likely force Crown Prince Mohammed bin Salman to borrow more on global bond markets and further cut back his multitrillion-dollar plans to transform the economy.
Crude has plunged to its lowest level in about four years after US President Donald Trump unveiled new tariffs on almost all countries on April 2, raising the possibility of a global recession. Within hours of that, OPEC+, an oil cartel headed by Saudi Arabia and Russia, shocked energy traders by saying it would speed up plans to raise output.
Brent crude recovered late on Wednesday after Trump said he’d delay some levies, but fell again on Thursday. At $64 a barrel, it’s still down almost 15% in the past week. And many analysts predict the worst is to come.
Saudi Arabia’s ministry of finance told Bloomberg it’s assessing the recent developments and stands ready to take whatever decisions are needed to keep its fiscal position strong.
“There’s going to have to be some fiscal adjustment,” Soussa, Goldman’s economist for the Middle East and North Africa, said in an interview.
“We’re going to see more borrowing and I do think there’s got to be a more aggressive re-prioritization when it comes to the projects,” he said. “They don’t shy away from these really difficult decisions.”
Even before this month’s rout, oil was too low for the kingdom to balance its budget. The government needed prices to be as high as $93 last year to achieve that, and $108 if the sovereign wealth fund’s spending on the crown prince’s mega projects was included, according to Ziad Daoud, chief emerging markets economist at Bloomberg Economics.
In recent months, the Saudi government delayed some spending. The finance ministry said that was to reprioritize projects and avoid overheating the economy.
“We remain confident that most of our vision targets are either achieved or on track and we will deliver on the key events we are hosting,” a spokesperson said.
While Saudi Arabia doesn’t disclose oil-price assumptions for its budget, it estimated this year’s fiscal deficit would be 2.3% of gross domestic product, but could rise to 3.7% in a low-revenue scenario. Goldman’s figure of $67 billion would mean a gap of more than 6%, the biggest since 2020, during the Covid-19 pandemic.
Oil production increases under OPEC+’s new plans will do little to counter the revenue losses from lower prices, according to Daoud, who has reduced this year’s growth outlook for the $1.1 trillion economy to 2.6% from 3%. He sees the non-oil sector, which the crown prince’s projects are focused on and which employs the vast bulk of Saudis, being affected.
“Despite the label, Saudi Arabia’s non-oil boom rides on oil,” Daoud said. “Lower prices mean spending cutbacks, slowing construction and reducing public-sector hirings.”
More borrowing beckons. That’s even though Saudi Arabia is already the biggest bond issuer in global markets among developing nations, having sold more than $14 billion of dollar and euro debt so far in 2025.
It could raise another $16.5 billion before the year’s out, barring further spending cuts, according to calculations by Tim Callen, a visiting scholar at the Arab Gulf States Institute in Washington. If so, that would smash the kingdom’s current annual record for international borrowing of $21.5 billion, set in 2017, according to data compiled by Bloomberg.
Such a task could become more complicated, and expensive, after Saudi Arabia’s credit-default swaps — a gauge of a country’s risk premium — jumped in the last week to the highest since 2020.
In the Gulf state’s favor, it has a debt-to-GDP ratio of around 30%, far below that of most other emerging markets. S&P Global Ratings upgraded it to the same level as Japan and China last month, saying the government’s efforts to diversify from oil were gaining traction.
Still, the weaker oil market will put the plans of the crown prince, known as MBS, to the test.
There are dozens of mega projects underway, including the ski resort of Trojena, the historical mud city of Diriyah and a cube-shaped skyscraper big enough to fit 20 Empire State Buildings. Those are all going on as the kingdom plans to host the World Expo in 2030 and men’s football world cup in 2034.
“Funding of the investment program was always going to be the key challenge for Vision 2030,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank. “The lower oil price significantly raises the challenge.”
To come up with more cash, Saudi Arabia has been selling stakes in companies. The government raised $12 billion through a follow-on share sale of oil giant Aramco in mid-2024, while the wealth fund raised $1 billion by disposing some of Saudi Telecom Co. in November.
That’s another lever the Saudis may continue to pull to plug the deficit, according to Goldman’s Soussa. Riyadh could also use its $410 billion of foreign-exchange reserves, though would probably avoid that since they’re mainly designed to back the riyal’s peg to the dollar, he added.
“They’re not going to build Trojena or the cube or Diriyah if doing so means that they’re going to go broke or they’re going to de-peg the currency,” Soussa said. “They won’t drive themselves into any of these kinds of economic binds simply to maintain their level of expenditure. That’s just not going to happen.”
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