Saudi Economy Keeps Upward Momentum in Q1 on Non-oil Business Expansion

The Saudi economy has demonstrated remarkable resilience in the first quarter of 2025, with its non-oil sector driving a 4.2% year-on-year expansion—the 17th consecutive quarter of growth—despite a 1.4% contraction in oil-related activities due to OPEC+ production cuts. This divergence underscores the Kingdom’s successful pivot toward economic diversification, a cornerstone of its Vision 2030 strategy. With the non-oil sector now accounting for 53.2% of GDP, up from 47.5% in previous estimates, Saudi Arabia has solidified its position as a regional economic powerhouse.

The Non-Oil Engine: Construction, Trade, and Logistics Lead the Way

The construction sector emerged as the standout performer, surging 61% year-on-year, fueled by massive infrastructure projects tied to Vision 2030 initiatives. From the futuristic NEOM smart city to the expansion of King Abdulaziz International Airport, these projects are reshaping Saudi Arabia’s economic landscape.

Wholesale and retail trade, along with hotels and restaurants, followed closely, growing 29.8%, reflecting increased domestic consumption and tourism. Transportation, storage, and communications also expanded by 25.6%, signaling robust activity in logistics—a critical pillar for the Kingdom’s ambitions to become a global trade hub.

The Numbers Behind the Growth: Revised GDP and Statistical Rigor

The latest GDP data, revised to align with international standards, paints an even brighter picture. The revision, based on surveys of 2.4 million sites and expanded economic classifications, revealed a 5.7 percentage point jump in the non-oil sector’s GDP contribution. This statistical rigor has bolstered investor confidence, as precise data is vital for capital allocation decisions.

Oil’s Role: A Temporary Dip, Not a Decline

While oil-related activities contracted by 1.4% in Q1, this was a strategic move under OPEC+ agreements. Saudi Arabia’s oil reserves remain vast, and the government’s focus on renewables and energy efficiency—such as its 50GW solar target by 2030—ensures oil’s long-term relevance as a revenue generator.

Investment Implications: Where to Look

The data highlights compelling opportunities in sectors aligned with Vision 2030:

1. Construction and Real Estate: With $320 billion allocated to infrastructure projects by 2030, companies like Saudi Oger (SAUDIOGER.SR) and local construction firms stand to benefit.

2. Financial Services: Al Rajhi Bank (ALRAJHI.SR), Saudi Arabia’s largest bank by assets, is well-positioned to capitalize on rising domestic credit demand.

3. Logistics and Tourism: The expansion of logistics hubs, like the Red Sea Port, and the growth of tourism (targeting 100 million annual visitors by 2030) favor firms like Agility Logistics (AGILITY.KW).

A Glimpse Ahead: IMF Backs the Narrative

The IMF projects the Middle East’s non-oil sectors to drive 2.6% regional GDP growth in 2025 and 3.4% in 2026, aligning with Saudi Arabia’s trajectory. With the non-oil sector now comprising over half of GDP, the Kingdom has transitioned from an oil-dependent economy to a multifaceted growth engine.

Conclusion: A New Era of Economic Diversification

Saudi Arabia’s Q1 2025 results are a testament to its commitment to diversification. The non-oil sector’s dominance—bolstered by infrastructure, tourism, and financial services—has created a sustainable foundation for growth. Investors ignoring this shift risk missing out on a market poised to redefine its economic identity.

As Vision 2030 enters its final decade, the numbers speak clearly: Saudi Arabia’s future is not just black gold—it’s concrete, data, and innovation. For those willing to look beyond oil, the rewards are already in motion.