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Riyadh, Saudi Arabia
Non-oil activities have come to represent about 55% of the Kingdom’s real GDP in 2025, up from about 45% when Vision 2030 was launched in 2016. These activities recorded a 4.9% growth in 2025, acting as the primary driver of Saudi economic growth in recent years.
However, 2026 put this transformation to a real test. In this article, we explain what diversifying the Saudi economy means in numbers, the sectors leading it, how non-oil activities withstood the oil shock this year, and what challenges remain.
What is Meant by Diversifying the Saudi Economy?
Economic diversification means reducing the state’s reliance on a single source of income—oil, in Saudi Arabia’s case—by building other sectors that generate GDP, jobs, and government revenues.
For decades, the performance of the Saudi economy was tied to oil prices and production volumes. When prices rise, the economy grows and the budget expands, and when they fall, everything slows down. Vision 2030 was established to break this cycle so that the economy has growth engines relatively independent of the energy market: tourism, manufacturing, financial services, mining, technology, and entertainment.
Size of the Saudi Economy Today
The Saudi economy is the largest in the Arab world, and its gross domestic product (GDP) at current prices reached about $1.28 trillion in 2025, according to World Bank data.
At constant prices, real GDP in 2025 was distributed across three main components, according to the DataSaudi platform:
| Component | Real GDP in 2025 |
|---|---|
| Non-oil activities | About 2.7 trillion Riyals |
| Oil activities | About 1.3 trillion Riyals |
| Government activities | About 648 billion Riyals |
In other words, non-oil activities have become more than double the oil activities in terms of real GDP. This is a clear structural change compared to what the economy was like a decade ago.
Important note when reading percentages: The share of non-oil activities is usually measured at constant prices. As for current prices, the share changes with oil prices; if oil prices rise, the non-oil share mathematically decreases even if it is growing strongly.
How Has Diversification Evolved Since 2016?
| Indicator | At Vision Launch (2016) | Latest Status |
|---|---|---|
| Share of non-oil activities in real GDP | About 45% | About 55% (2025) |
| Non-oil government revenues | 186 billion Riyals | 502 billion Riyals (2024) |
| Private sector contribution to GDP | About 40% | About 51% (2025) |
Non-oil revenues specifically are the clearest evidence of the transformation, as they mean the budget no longer relies solely on oil. Most of this growth has come from value-added tax, service fees, and investment returns.
Sectors Leading Non-Oil Growth
- Tourism: The most prominent diversification story. Total tourism spending reached a record 304 billion Riyals in 2025. The Kingdom surpassed its original target of 100 million visits years ahead of schedule, raising the target to 150 million visits by 2030. Mega-projects like the Red Sea, AlUla, and Diriyah are leading this expansion, along with religious tourism and entertainment seasons.
- Industry and Logistics: The National Industrial Development and Logistics Program announced that its contribution to non-oil GDP reached about 1.045 trillion Riyals. The sector benefits from local content policies and the Kingdom’s location bridging three continents.
- Wholesale and Retail Trade: Growing with domestic demand, rising household incomes, and women’s participation in the labor market. It was among the largest sectors in terms of new investment licenses in 2026 (Internal link → Article “Jump in Investment Licenses”).
- Financial Services: Financial, insurance, and business services recorded the highest growth rate in the first quarter of 2026 at 5.4%, supported by the expansion of the stock market, fintech, and the Financial Sector Development Program.
- Mining: The Kingdom seeks to make it the third pillar of industry after oil and petrochemicals, based on massive reserves of phosphate, gold, copper, and bauxite.
The 2026 Test: Did Non-Oil Activities Hold Up?
The war in the region and the disruption of navigation through the Strait of Hormuz since late February 2026 provided a practical test for the idea of diversification. The result was a mix of resilience and a slowdown.
In the first quarter of 2026, non-oil activities grew by 2.9% and were the largest contributor to overall growth by 1.7 percentage points. In the second quarter, oil activities dropped by 24.8% and total GDP contracted by 4.7%, while non-oil activities continued to grow at 0.9%.
This figure carries two messages at the same time. The first is positive: two decades ago, an oil shock of this magnitude would have dragged the entire economy into contraction, whereas today, the bulk of the economy remained in positive territory. The second is a warning: non-oil growth slowed sharply from levels exceeding 4%, meaning it is still influenced by government spending funded by oil and by investor confidence in the region.
Remaining Challenges
Despite the progress, diversifying the Saudi economy faces several challenges acknowledged by analysts:
- Oil is still central: It remains the largest source of exports and a large portion of government revenues, meaning the economic base has broadened but oil has not lost its role.
- Reliance on government spending: A part of non-oil growth comes from construction projects funded by the state and the Public Investment Fund, which are affected by oil revenues.
- The private sector gap: Private sector contribution is at about 51%, while the target is 65% by 2030, with only about four years remaining.
- Foreign investment: It is still far from the target of 388 billion Riyals annually by 2030.
Future of the Saudi Economy: What’s After 2026?
International institutions expect a strong recovery in 2027, primarily led by a rebound in oil production. But more importantly from a diversification perspective is the expectation that non-oil growth will re-accelerate. Riyad Capital, for example, expects non-oil activity growth to rise from 3.0% in 2026 to 4.7% in 2027 (Internal link → Article “Growth Forecasts”).
In the longer term, the future of the Saudi economy depends on three factors: the private sector’s ability to drive growth instead of government spending, converting announced licenses and investments into productive projects and jobs, and continuing regulatory reforms that make the market attractive to domestic and foreign investors. Hosting major events such as Expo 2030 and the 2034 World Cup will also support the tourism, construction, and services sectors over the coming years.
What Does Diversification Mean for the Investor?
For someone investing in the Saudi market, diversification means that opportunities are no longer confined to energy and petrochemical companies. Sectors like banking, retail, healthcare, tourism, and logistics now represent a larger share of the economy and the financial market.
On the other hand, the 2026 experience is a reminder that these sectors are not completely isolated from oil. An investor who builds a diversified portfolio across sectors benefits from the economic diversification itself, rather than betting on a single sector. If you are thinking of starting, check out our guide on choosing the best stock trading software in Saudi Arabia (Internal link → Article “Best Stock Trading Software”).
This article is for informational purposes only and is not considered investment advice.
