Saudi Arabia – a flexible approach to Vision 2030
19 NOV, 2025
By Mali Chivakul, Emerging Markets Economist at J. Safra Sarasin
On Tuesday, Saudi Arabia’s Crown Prince Mohammed bin Salman met President Trump in Washington to discuss security, trade, and investments. Beyond security interests and the U.S. commitment to sell fighter jets and advanced chips to Saudi Arabia, bilateral investments formed a major part of the agenda. Large U.S. companies pledged to invest in Saudi infrastructure projects, while Saudi state entities committed to investing in artificial intelligence and data centers in the United States. During the meeting, Saudi Arabia pledged USD 600 billion.
Our impression from the high-level meeting is that Saudi Arabia is working intensively to increase foreign direct investment (FDI) – one of the goals of Vision 2030. However, Vision 2030, which aims to diversify the economy away from oil, appears to be highly flexible. While large-scale projects planned since 2016 have faced significant delays and downsizing (such as The Line), some new initiatives – like Humain, the AI company controlled by the Public Investment Fund – were launched only this year. The acquisition of advanced chips from the U.S. should support this effort.
Aside from the shift in investment priorities, the underlying situation in Saudi Arabia this year is not very different from last year. Growth in the non-oil sector remains robust, even though its share of GDP has stabilized following the increase in oil production after OPEC loosened production limits. When we last wrote about Saudi Arabia in December 2024, we concluded that the country had made substantial progress in diversifying its economy under Vision 2030.
Despite overspending, there were encouraging signs that the government had internalized the structural weakness of the oil sector, as major investment projects had been redefined and recalibrated according to priorities. The 2025 budget implied fiscal consolidation. One year later, however, Saudi Arabia is again posting significant budget overruns, with lower oil prices and higher-than-expected spending. According to IMF estimates, the fiscal breakeven oil price for this year is USD 92 per barrel, far above the current level of USD 67. The 2026 budget is now being prepared, and the plan foresees a deficit smaller than in 2025.
The scaling back of certain projects is an encouraging sign that the government is aware of the consequences of its fiscal stance. However, other projects have not been reduced – such as the airport expansion and the Red Sea tourism project. Construction costs could still end up exceeding initial estimates and could risk undermining Saudi Arabia’s solid fiscal position through potential overruns. According to IMF projections, a stable fiscal deficit over the next five years would push public debt to 40% of GDP by 2030. Large projects – including new AI initiatives – will likely involve significant import-related expenses.
The IMF’s estimate of the external breakeven oil price is slightly lower than the fiscal one, at USD 85. Current account deficits of about 3% of GDP are likely to become the norm in the medium term. Currently, Saudi Arabia is financing these deficits mainly through greater issuance of foreign debt. However, reliance solely on external public debt is not a prudent long-term strategy. Saudi Arabia needs greater foreign private-sector participation. Although efforts to attract more FDI have intensified, current levels – 2.5% of GDP – remain less than half of the 2030 target.
The Saudi government has implemented several reforms to support foreign investment. The new investment law, which came into effect earlier this year, simplifies licensing procedures and guarantees equal treatment for local and foreign investors across nearly all sectors. The recent easing of real estate ownership rules is another positive development. Allowing GCC residents to operate in the stock market and enabling foreign companies to issue depositary receipts are further steps in the right direction. However, since these reforms are recent, it will take time before their full effects materialize.
