Saudi Arabia is poised for significant economic growth in 2025, driven by its efforts toward economic diversification and the robust expansion of the non-oil sector as outlined in its Vision 2030 strategy.

According to an analysis by First Abu Dhabi Bank (FAB), the Kingdom's non-energy gross domestic product (GDP) is projected to increase by 4.4 percent in 2025, surpassing the 3.5 percent growth anticipated for 2024. This forecast aligns with similar predictions from PwC, which also estimates a growth rate of 4.4 percent for the non-oil economy in the same period.

The International Monetary Fund (IMF) indicated in January that Saudi Arabia's overall economy is expected to expand by 3.3 percent in 2025, with a further increase to 4.1 percent in 2026. Concurrently, a recent report from Riyad Bank projects a GDP growth rate of 4.8 percent for the Kingdom in 2025.

FAB stated that its optimistic outlook is supported by the recent upgrade of Saudi Arabia's sovereign credit rating by Moody's in November 2024, which elevated the rating from A1 to Aa3, maintaining a stable outlook.

Moody’s describes an Aa3 rating as reflective of a country or entity with high quality, low credit risk, and a strong capacity to meet short-term liabilities.

The upgrade is attributed to the success of Saudi Arabia's economic diversification and its diminished reliance on oil market fluctuations amid challenges associated with carbon transitions.

Jihad Azour, director of the IMF's Middle East and Central Asia Department, noted earlier this year that the Kingdom is solidifying its position within the international financial system, emerging as an economic 'powerhouse.'

Regionally, GDP growth for the Gulf Cooperation Council (GCC) is expected to double from 2.1 percent in 2024 to 4.2 percent in 2025, fueled by growth in non-energy sectors across member countries.

FAB further forecasts that the United Arab Emirates' (UAE) economy will expand by 5.6 percent in 2025, up from 4.5 percent in the previous year, which outpaces the IMF’s global growth forecast of 3.2 percent.

The anticipated growth in the UAE is attributed to strategic investments and diversification in its non-oil economy.

The IMF projects that Egypt's economy will also experience growth of 4.1 percent in 2025, an increase from 2.7 percent in 2024. The report highlights that while the global economic environment in 2025 presents challenges, the GCC region continues to display resilience and opportunities for growth.

On interest rates, FAB forecasts that sovereign interest rates within the GCC are likely to align with those of the United States, influenced by the dollar-pegged currencies prevalent in the region.

Business conditions in the non-oil sector across GCC countries are showcasing significant growth, with most nations reporting a Purchasing Managers’ Index (PMI) above 50, which indicates expansion since late 2020. In January, Saudi Arabia recorded a PMI of 60.5, marking its highest level in a decade.

Meanwhile, the UAE reported a PMI of 55, followed by 53.4 in Kuwait, 50.2 in Qatar, and 50.7 in Egypt.

These PMI readings reflect strong domestic activity, consumption, and private investment, highlighting the successful implementation of economic diversification strategies in key sectors, including technology, healthcare, education, tourism, finance, renewable energy, and artificial intelligence.

Comparatively, the Eurozone manufacturing PMI remains below 50, underscoring the relative buoyancy of the GCC's non-oil economy.

National initiatives such as the UAE’s Vision 2031 and Saudi Arabia’s Vision 2030 are identified as significant drivers for growth in technology and non-oil sectors throughout the region.

FAB projects that GCC equity markets will deliver returns of 12 percent to 13 percent in 2025, bolstered by recovery across vital sectors and financial stability.

The analysis notes that countries in the region are making substantial investments in healthcare, technology, and financial services—areas expected to contribute significantly to future GDP growth.

Investment opportunities within the GCC are projected to expand as digital transformation accelerates, particularly in sectors focused on innovative technologies like artificial intelligence, big data, and cybersecurity.

Saudi Arabia's infrastructure development is attracting foreign direct investments, with expected significant benefits for industries involved in construction and technology.

Sustainability also serves as a focal point for investors in the region.

Governments are promoting eco-friendly practices, facilitating investment in renewable energy and waste management sectors.

Notably, Saudi Arabia and the UAE are investing heavily in solar energy initiatives to meet their green energy goals.

The demand for environmental, social, and governance (ESG)-compliant companies is increasingly shaping investment preferences across the region, presenting opportunities in sustainable finance.

The healthcare sector is anticipated to attract significant investment due to demographic changes and heightened awareness.

The tourism sector, supported by initiatives such as Saudi Arabia's NEOM project and Expo 2030, is also seen as a growth engine, with opportunities in hospitality and related services.

In real estate, rising demand for residential and commercial properties signals potential investment avenues.

Regulatory changes, such as the recent guidelines from Saudi Arabia's Capital Market Authority allowing foreign investment in companies that own real estate in Makkah and Madinah, enhance the attractiveness of the real estate market for both domestic and international investors.