Saudi Arabia Q1 GDP Growth Slows to 2.8% Amid Iran War

Saudi Arabia's economic growth slowed significantly in the first quarter of 2026 following the US-Israeli war with Iran, with GDP expanding just 2.8 percent according to a flash estimate released by the General Authority of Statistics on Thursday, April 30, 2026. This marks a sharp decline from 5 percent growth in the fourth quarter of 2025 and represents the slowest pace since the start of 2024. Economists warn that worse figures may be forthcoming in the second quarter as the full impact of the conflict materializes.

Oil Sector Contraction

Oil growth collapsed to 2.3 percent in Q1, down from 10.8 percent in the previous quarter, as Saudi Arabia shut some oil wells in response to oil export disruptions triggered by the war. According to Capital Economics, the Q1 data "only capture the first month of the conflict and include two months of data before the conflict began," meaning the impact is not fully reflected in the headline figures.

Jason Tuvey, Capital Economics' deputy chief emerging markets economist, stated that Q2 could be "a lot worse," while cautioning that the Q1 flash estimate could still be revised downward as more complete data becomes available.

Analyst Assessment and IMF Revision

Monica Malik, chief economist at Abu Dhabi Commercial Bank, characterized the situation by noting: "The impact of the Iran war is very visible." She emphasized that "spillovers from the Iran war are taking a heavy toll on the economy," according to Capital Economics' analysis.

The International Monetary Fund responded to the conflict by adjusting Saudi Arabia's overall GDP growth forecast for 2026 downward from 4.5 percent to 3.1 percent.

Revenue Offset and Government Spending

Despite the production slowdown, economists expect the impact on Saudi Arabia's budget to be substantially offset by elevated oil prices. Brent crude approached $125 a barrel on Thursday for the first time in four years, according to the article.

Malik noted that "what's more important for Saudi is government revenue and oil revenue," and stated: "We now expect high oil revenues for 2026 and 2027." She explained that while oil production and exports have been reduced since the war's start, the higher prices should increase government revenues, facilitating continued state spending on Vision 2030 development projects such as AlUla.

"With the crisis we expect less of an impact on Saudi Arabia than on other economies," Malik concluded.