Saudi revenues to hit $314bn in 2027 as deficit narrows

Saudi Arabia’s fiscal outlook is tightening in investors’ favour, with Al Rajhi Capital projecting that government revenues will climb 1% in 2027 to SAR1.2 trillion ($314 billion) while spending falls 3% to SAR1.4 trillion ($367 billion) compared with the 2026 estimate. The combination, set out in the financial services provider’s latest review, narrows the projected fiscal deficit to SAR191 billion, equivalent to 3.6% of GDP, from 4.9% in 2026.

The kingdom’s public finances have been running wider gaps than originally budgeted. The 2026 deficit is estimated at SAR245 billion, or 4.9% of GDP, a level that exceeds the original budget estimate of SAR165 billion but stays below the 5.8% of GDP recorded in 2025. From there, Al Rajhi Capital sees the shortfall shrinking to 3.6% of GDP in 2027 and 3.1% in 2028, before edging back up slightly to 3.3% in 2029.

Underpinning that trajectory, the Saudi financial powerhouse argues, is a resilient economy supported by strong oil-sector infrastructure and continued diversification, a mix that keeps the kingdom’s credit story intact even as deficit financing needs remain material.

Meanwhile, the fiscal picture sits alongside evidence of momentum in the real economy, particularly construction, a sector closely watched as a barometer of contract activity and project pipelines. In its Saudi Construction Index published last month, Al Rajhi Capital reported that construction activity expanded for the fourth straight month in August, driven by resilient demand conditions and a sustained recovery in new orders.

The seasonally adjusted index, compiled by S&P Global Market Intelligence, climbed to 55.4 in August from 55.2 in July. That kept the reading comfortably above the 50-point threshold separating expansion from contraction and marked the second-highest reading since the survey began in January, a signal that order books and output across the building sector continue to strengthen.

Broader business sentiment corroborates that strength. A report released in August by the General Authority for Statistics showed the kingdom’s Business Confidence Index eased marginally to 56.5 in July from 56.6 in June. Within that, the construction industry posted a reading of 57.7, ahead of both industry at 54.7 and services at 55.3, underscoring construction’s position as the most confident corner of the private economy.

For market-watchers, the combined picture is one of a state budget moving steadily back toward balance while the private sectors most tied to capital deployment keep expanding. Rising revenue against falling expenditure reduces the financing burden implied by the deficit, and the projected path from 4.9% of GDP in 2026 to 3.1% by 2028 offers a measurable benchmark for how quickly that adjustment lands. The slight uptick projected for 2029, to 3.3%, suggests the consolidation is not linear, but the overall direction remains one of narrowing gaps.

The construction data adds a demand-side check on that story. Four consecutive months of expansion, with the August reading among the strongest since the survey’s January start, points to sustained new orders rather than a one-off rebound. Confidence readings above the expansion threshold across construction, industry and services indicate that businesses across the main non-oil segments expect conditions to hold.

Al Rajhi Capital’s review frames the kingdom’s economic resilience as resting on two pillars: the established strength of oil-sector infrastructure and the ongoing push to diversify. The revenue and spending projections, together with the deficit path through 2029, translate that argument into numbers that lenders, investors and operators can track. With revenues set to reach SAR1.2 trillion in 2027 and the deficit projected to shrink for successive years, the fiscal consolidation now under way gives the kingdom’s economic expansion a firmer financial footing, and the question for investors is whether the 2029 uptick proves a pause or the start of a plateau.