OECD Projects Saudi GDP to Grow 2.5% in 2026

The Organisation for Economic Cooperation and Development (OECD) has predicted that Saudi Arabia’s real gross domestic product will grow by 2.5% in 2026, overtaking developed countries such as the US, Germany, the UK, and France.

The OECD also said that Saudi Arabia is expected to maintain a healthy inflation rate of 1.9% in 2025 and 1.8% in 2026, respectively.

In its latest report entitled “Economic Outlook,” the OECD said that the Kingdom’s economy is projected to grow by 1.8% this year, also higher than several of its G20 peers. It may be recalled that the International Monetary Fund (IMF) said that the Kingdom’s economy would register a growth of 3% in 2025 and would further accelerate to 3.7% in 2026.

The GDP growth in the US is projected to decline from 2.8% in 2024 to 1.6% in 2025 and 1.5% in 2026. In the euro area, growth is projected to strengthen modestly from 0.8% in 2024 to 1% in 2025 and 1.2% in 2026. China’s growth is projected to moderate from 5.0% in 2024 to 4.7% in 2025 and 4.3% in 2026, OECD said.

The OECD also downgraded its global economic growth prospects from 3% to 2.9% for both 2025 and 2026 based on the assumption that tariff rates as of mid-May are sustained. Collectively, G20 nations are expected to witness an economic growth of 2.9% in both 2025 and 2026.

Uncertainty Curbing Growth

OECD Secretary-General Mathias Cormann said that the global economy has shifted from a period of resilient growth and declining inflation to a more uncertain path as today’s policy uncertainty is weakening trade and investment, diminishing consumer and business confidence and curbing growth prospects.

“Governments need to engage with each other to address any issues in the global trading system positively and constructively through dialogue – keeping markets open and preserving the economic benefits of rules-based global trade for competition, innovation, productivity, efficiency and ultimately growth,” Cormann said.

The report also said that India’s GDP is expected to expand by 6.3% in 2025 and 6.4% in 2026. Germany’s GDP is set to grow by 1.2% during 2026.

The French economy is forecast to expand by 0.6% in 2025 before slightly accelerating to 0.9% in 2026, and the OECD projects the UK’s economy will advance by 1.3% in 2025, while it will decelerate to 1% growth next year.

Rising trade costs, particularly in countries implementing new tariffs — are likely to fuel inflation, although this may be partly offset by softer commodity prices. Risks to the outlook remain substantial.

“Inflation may also stay elevated for longer than anticipated, especially if inflation expectations continue to rise. On the upside, an early reversal of recent trade barriers could boost economic growth and help ease inflationary pressures,” OECD said.

The OECD also highlighted the importance of implementing effective monetary policies, noting that central banks should remain vigilant to prevent disinflation in times of heightened uncertainty and increased trade costs.

“Provided trade tensions do not intensify further and inflation expectations remain anchored, policy rate reductions can continue in economies where inflation is projected to moderate,” added the report.