Saudi economy contracts 4.8% in Q2, most in 6 years, as oil activity tumbles

Saudi Arabia‘s economy contracted 4.8% year-on-year in the second quarter of 2026, the steepest decline recorded since the COVID-19 pandemic, as a deep decline in oil activity outweighed modest growth in the non-oil and government sectors, official flash estimates showed Thursday.

The reading marked a sharp reversal from the first quarter, when the kingdom’s real gross domestic product expanded 3% annually, according to the General Authority for Statistics.

Oil activities plunged 24.7% from the same period last year, while non-oil activities grew 0.6% and government activities increased 0.9%, the authority said.

The oil sector subtracted 5.4 percentage points from annual GDP growth. Non-oil activities added 0.4 percentage points, while government activities and net taxes on products each contributed 0.1 percentage points.

On a seasonally adjusted basis, real GDP fell 4.9% in the second quarter compared with the previous three-month period.

The quarterly decline was driven largely by a 21.5% contraction in oil activities. Non-oil activities decreased 0.5%, while government activities rose 0.2%.

Oil activities made a negative contribution of 4.5 percentage points to the quarterly GDP reading, while non-oil activities and net taxes on products subtracted 0.3 and 0.1 percentage points, respectively.

The estimates use indicators covering production, expenditure, income, prices, and foreign trade, and are generally released 30 days after the end of the quarter.

The figures came as the war in the Middle East and the near halt in shipping through the Strait of Hormuz disrupted Saudi trade and oil exports, according to the International Monetary Fund.

The IMF said redirecting crude through the kingdom’s East-West pipeline to Red Sea ports had limited the decline in oil deliveries, while higher crude prices had helped offset lower export volumes.

The fund expects Saudi Arabia’s economy to grow 1.7% in 2026 before accelerating 5.5% in 2027, assuming energy production and maritime transportation gradually normalize.