Saudi Arabia Country Risk Rating

The overall risk is medium, with political violence and political interference classified as medium high and medium risks, respectively. Over the last ten years, regional political and security stability has remained a key priority for Saudi Arabia, especially as it pursues its Vision 2030 goals, which aim to diversify the economy. While progress has been made on several fronts, the conflict in Iran has called into question the stability of the region, directly affecting Saudi Arabia's long-term vision. In the early stages of the war, Riyadh leaned on its direct line to Tehran, engaging with renewed urgency to contain the crisis. However, Saudi Arabia acted as a supporting facilitator and advocate of de-escalation, but the eventual ceasefire was brokered by Pakistan. Moreover, its position hardened as the war progressed and, according to the Wall Street Journal, Saudi Arabia eventually restored the US military's access to bases and airspace that it had restricted when Washington launched its operation to reopen the Strait of Hormuz. On another front, tensions with the UAE have risen in recent months. First, the UAE’s departure from OPEC, while long anticipated by some observers, still weakens Riyadh's position. Saudi Arabia remains the dominant player in the organization, but it is now the only major producer holding significant spare capacity and may be forced to trim its own output and exports to offset future Emirati increases. Second, Saudi forces intervened in Yemen against the Southern Transitional Council in late 2025 and early 2026 to reverse its seizure of Aden, and Riyadh accused the UAE of backing the group, a rare open breach between the two.

According to the IMF's 2026 Article IV mission, GDP expanded by 4.5% in 2025, but growth is expected to slow to about 2% in 2026, assuming maritime traffic through the Strait of Hormuz normalizes in the coming months. Data from the IMF’s April Fiscal Monitor puts Saudi Arabia’s general government overall balance as percentage of GDP at -3.5% in 2026 and at -3.4% in 2027, while general government gross debt at 32.1% of GDP in 2026 and 34.8% in 2027. The risks of sovereign non-payment and the government's inability to provide stimulus are medium and medium low, respectively.

The Iran conflict and the resulting restrictions on shipping through the Strait of Hormuz have disrupted trade and weighed on both the oil and non-oil economies. Even so, activity has held up comparatively well, helped by a broad and diversified infrastructure base and by swift official action to reroute shipments and relieve logistical bottlenecks. The Kingdom also entered the shock with meaningful buffers in the form of modest government debt, sizeable reserves and one of the world's largest sovereign wealth funds. The PIF's recalibrated strategy for 2026 to 2030 reinforces this discipline, narrowing the fund's focus to fewer priorities and seeking to draw more private capital in alongside its own. The leadership is also treating the war as an opportunity to reset spending priorities. A rethink of the mega projects was already underway before the conflict, and the crisis now provides cover for deeper changes to the investment strategy. The risks of doing business and supply chain disruptions are assessed medium low and medium, respectively.

The risks of exchange transfer and banking sector vulnerability are medium and medium low, respectively. The riyal's dollar peg continues to anchor monetary policy and support financial stability at a time of heightened uncertainty. Banks entered the shock with solid capital and liquidity positions, and the system is broadly sound, well supervised and accessible to depositors.