Saudi 2026: Open markets and moderate earnings to drive growth

Macroeconomic Landscape: Growth Tempered by Twin Deficits 

Saudi Arabia’s macroeconomic outlook for 2026 presents a balanced picture. The Kingdom’s real GDP is projected to grow by 4.0% in 2026, supported by a recovery in the oil sector and steady non-oil activity. Oil-GDP is forecast to expand by 5.2% as OPEC+ production cuts are reversed, with production expected to recover to 10 million barrels per day in 2026. Non-oil GDP is projected to grow by 3.5%, driven by the continued implementation of Vision 2030 projects and preparations for major international events, including the World Expo 2030 and FIFA World Cup 2034.

However, twin current account and fiscal deficits remain a challenge. Softened oil revenues and a surge in investment-linked imports are expected to result in a current account deficit of 2.5% of GDP in 2026. Furthermore, with the muted outlook for oil prices in 2026 and high capital expenditure linked to Vision 2030 projects, the fiscal deficit is forecast at 3.3% of GDP for 2026. Despite these pressures, a stable inflation environment of 2.0% and the U.S. dollar peg provide a credible anchor for monetary policy.

Earnings Outlook: Financials and Telecommunication to Offset Energy 

Following a challenging 2025 where TASI delivered a -12.8% return, corporate earnings are expected to stage a modest recovery. Corporate earnings are forecast to grow by 4.1% in 2026, an improvement over recent years driven by strengthening domestic demand.

Sector performance is expected to be bifurcated. Financials sector is projected to see 8.6% earnings growth, supported by a 13% credit growth forecast and potential easing of foreign ownership limits, which could drive emerging market fund flows. Energy sector outlook remains negative, with earnings expected to decline by 1.8%. Energy giant Saudi Aramco’s consensus EPS is projected to decrease by 2.4% due to muted global oil demand. Positive momentum in technology and utilities is expected to provide a buffer against the decline in energy sector.

Valuation Attraction: A Silver Lining for Investors 

One of the most positive aspects of the 2026 outlook is the attractiveness of market valuations following the significant corrections in 2024 and 2025. The benchmark P/E ratio dropped to 16.1x in 2025, representing a sharp discount compared to the five-year average of 19.9x. Additionally, the market offers a healthy average dividend yield of 3.8%, with index heavyweights like Saudi Aramco and select banks offering yields in the 5–6% range. This combination of low price multiples and high yields provide a supportive foundation for future returns.

Overall, Saudi stock market enters 2026 with a neutral outlook, balancing mixed macroeconomic backdrop and moderating earnings against relatively attractive valuations. While higher oil production and sustained investment activity should support real GDP growth, equity returns are likely to increase modestly, driven by earnings delivery and dividends in 2026.

To read the full Saudi Equity Market 2026 Outlook report visit Macro & Markets GCC - Saudi Arabia Outlook - January 2026