IMF: Saudi Arabia is more capable of absorbing shocks than the rest of the Gulf countries

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The Director of the Middle East and Central Asia Department at the International Monetary Fund, Jihad Azour, confirmed that the Saudi economy has shown a remarkable ability to confront the repercussions of geopolitical tensions and turmoil that affected energy markets and trade chains in the region, benefiting from the diversity of infrastructure, the flexibility of the economy, and its large reserves.

Azour said in an interview with Al Arabiya Business on the sidelines of the International Monetary Fund and World Bank meetings in Bangkok, that a number of factors enabled the Kingdom to limit the impact of the crisis, most notably the large investments in infrastructure that allowed the diversification of oil export and commodity import routes, in addition to the presence of strategic facilities and installations on the Red Sea that contributed to enhancing the flexibility of supply chains. "High reserve levels, coupled with previous investments in infrastructure, have given Saudi Arabia great flexibility to quickly redirect oil exports," he added.

He explained that the structure of the Saudi economy and the nature of the relationship between the oil and non-oil sectors, in addition to the Kingdom’s possession of reserves and assets outside the Gulf region, all contributed to mitigating the effects of war and regional tensions on the economy.

He pointed out that Saudi Arabia also played a pivotal role in maintaining a high degree of stability in the global oil and gas markets during the recent period.

Regarding the International Monetary Fund’s expectations for the Saudi economy, Azour explained that the expected contraction during 2026 is primarily due to the performance of the oil sector, while the non-oil sector continues to show levels of flexibility.

He said that the impact of the slowdown on non-oil activities remains limited, while the oil sector is expected to record negative growth of about 3.4%, which is the main factor behind the overall economic performance during the year.

He added that the Sultanate of Oman was the least affected by the economic repercussions of the crisis at the level of the Gulf states, followed by Saudi Arabia and then the UAE, indicating that the Kingdom is in a better position than its Gulf counterparts to overcome these turmoil.

Azour pointed out that the Fund’s expectations for the year 2027 are based on the assumption that the negative effects of the regional conflict on trade and economic activity will decline during the first quarter of next year.

He added that the basic scenario assumes a gradual return of production to normal levels by mid-2027, which supports the recovery of economic activity in the region.

He explained that the level of uncertainty is still high, and that geopolitical developments may take different paths, but the Gulf economies have large margins of safety that help them confront shocks.

He stressed that Saudi Arabia has strong financial reserves, while the economy has a more diversified economic base and the ability to absorb the effects of crises compared to what was the case in previous periods.

Azour said that the economic reforms and diversification programs implemented by the Kingdom over the past years have strengthened the economy’s resilience and raised its ability to deal with regional and global challenges.

Regarding the Gulf economies, Azour said that the Qatari economy is one of the Gulf economies most affected by the current crisis due to the dependence of gas and energy exports on shipping traffic through the Strait of Hormuz, noting that expectations indicate a contraction of the Qatari economy by about 16.8% during the year 2026, to be followed by a strong recovery during the year 2027.

He added that the Fund expects a rapid recovery pattern next year that includes Qatar and a number of Gulf economies after the effects of the crisis end.

He pointed out that the damage to the gas facilities led to a re-evaluation of the timetable for the return of production, but the information received from Qatar indicates an acceleration in the pace of repairs and the return of the facilities to the production levels they were at before the crisis.

Azour stressed that these expectations remain linked to a high degree of uncertainty, explaining that the course of events during the next stage will remain a key factor in determining the size and speed of recovery.

Commenting on the impact of the war on accelerating alternative infrastructure projects, Azour said that the crisis highlighted the ability of the Gulf countries, economically and institutionally, to adapt to shocks.

He added that the Gulf Cooperation Council countries demonstrated during the Corona pandemic, and again during the current crisis, a great ability to develop policies and procedures that limit the economic repercussions and support market stability.

He explained that managing the crisis is not limited to dealing with its direct repercussions, but also includes enhancing the ability to absorb future shocks by developing alternative channels and paths for export and transport.

Azour pointed out that one of the most important lessons learned is the importance of cooperation between the Gulf countries, pointing out that a report that will be issued soon by the International Monetary Fund will show the size of the large economic returns resulting from Gulf integration and infrastructure sharing among the GCC countries.

He stressed that cooperation in infrastructure and creating additional outlets for trade and energy reduces dependence on one path or outlet, which enhances economic flexibility during crises and periods of stability alike.

Azour added that the current crisis will also accelerate the pace of investment in future sectors, most notably artificial intelligence and advanced technology.

He pointed out that there is a clear trend among countries in the region to enhance these investments and support economic diversification paths.

He considered that the current war represents a major shock to the region, but at the same time it may constitute an important turning point in the economic path of the Gulf states, benefiting from the financial reserves and institutional capabilities they possess to confront the challenges and promote growth in the next stage.