Saudi Arabia's Economy Shrinks 3.8% as Oil Output Falls

What happened

Saudi Arabia's real gross domestic product shrank 3.8% year over year in the third quarter, the General Authority for Statistics said Sunday. Oil activities fell 20.4% from the same period in 2025, while non-oil activities rose 1.9%.

Confirmed

Global impact / market context

Falling oil output cuts the government revenue that funds public spending, and the article notes reluctance to cut spending leaves limited room to absorb the hit. That squeezes the budget and the cash available, weakening the economy's main engine even as non-oil work grows slowly.

Analyst inference

The data only cover the period through Sept. 30, so recent attacks on airports and other infrastructure by Iran-aligned Houthi militants are not reflected. That means travel disruption and any further damage to oil output could weigh on fourth-quarter activity beyond these figures.

Analyst inference

What to watch

1. Watch the fourth-quarter GDP release because it will be the first data to capture the airport attacks and other escalations after Sept. 30, which these figures exclude. Confirmed
2. Track oil output levels and non-oil activity growth; a wider gap would signal the economy remains tied to oil, the article's main drag on GDP. Analyst inference
3. Watch whether Saudi Arabia cuts public spending to offset weaker oil revenue, a step the article says it has been reluctant to take and which would affect companies relying on government demand. Proposed

Evidence

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