RIYADH: Ƶ’s non-oil revenues rose by 6.6 percent in the second quarter of 2025 compared to the same period of last year, reaching SR149.86 billion ($39.96 billion).
According to data from the Ministry of Finance’s quarterly budget performance report, this marks a key fiscal milestone, with non-oil revenues now accounting for 49.7 percent of total government income, up from less than 40 percent a year ago.
Oil income fell by 28.76 percent during this period, totaling SR151.73 billion compared to SR213 billion a year earlier. This pulled total government revenues down by 15 percent annually to SR301.6 billion.
The shift reflects two main drivers: the Kingdom’s economic diversification push under Vision 2030, and the voluntary oil production cuts implemented under OPEC+ agreements in late 2023 to stabilize global prices.
These cuts, initially amounting to 1 million barrels per day, have been unwound in gradual phases throughout 2025, with output increases of 138,000 bpd in April, followed by 411,000 bpd increments in May and June.
Production is on track to return to pre-cut levels by September, earlier than initially planned, as the nation seeks to balance market stability with reclaiming market share.
For the first half of 2025, the Kingdom’s revenues stood at 47.74 percent of the year’s budgeted target, signaling alignment with fiscal planning.
What drove non-oil revenue growth?
The largest contributor to non-oil income was taxes on goods and services, which accounted for 50 percent of the total, or SR 74.95 billion.
“Other revenues” followed with a 19.26 percent share or SR28.9 billion, encompassing earnings from government entities, including the Saudi Central Bank, administrative fees, and port service charges, as well as advertising income, and fines.
Other taxes, primarily corporate zakat, totaled SR26 billion, while income, profit, and capital gains taxes generated SR13.73 billion. Taxes on international trade and transactions added SR6.32 billion.
Much of this growth is linked to robust activity in non-hydrocarbon sectors.
Ƶ’s General Authority of Statistics had reported that the Kingdom’s gross domestic product grew by 3.4 percent year on year in the first quarter, driven primarily by a 4.9 percent expansion in non-oil transactions while oil activities contracted by 0.5 percent.
The strongest gains came from wholesale and retail trade, restaurants and hotel sector, which grew by 8.4 percent, transport and communications by 6 percent, and finance and business services by 5.5 percent.
This robust non-oil sector performance, reinforced by tourism, entertainment, technology, and manufacturing growth under Vision 2030, has translated into higher consumption taxes, service fees, and other government income streams, helping to further lift non-oil revenues in the second quarter budget performance report, even as oil revenues declined year on year.
Expenditure trends and fiscal priorities
Government expenditures in the second quarter fell 8.9 percent year on year to SR336.13 billion. The largest outlay was compensation to employees, which rose 0.4 percent to SR140.40 billion, representing 41.77 percent of total spending.
Expenditure on goods and services came second, at SR73.58 billion, with a 22 percent share.
Non-financial assets or capital expenditure reached SR39.9 billion but fell sharply, nearly 39 percent year on year.
Social benefits totaled SR39.2 billion, down 0.1 percent year on year, while “other expenditures” declined 5 percent to SR23 billion.
According to the Ministry data, total expenditure for the first half of 2025 reached 51.24 percent of the annual budget forecast, in line with fiscal planning.
Deficit financing and debt profile
The second quarter closed with a budget deficit of SR34.53 billion, which, while 41 percent lower than the first quarter deficit, is 125.11 percent higher than the same quarter last year.
This increase was expected, as government spending is accelerating in the mid-cycle of Vision 2030 initiatives, particularly in infrastructure and mega-project execution phases.
For the first half of 2025, the deficit totaled SR93.23 billion, fully funded through borrowings, according to the ministry.
End-of-period public debt reached SR1.39 trillion, up 14.1 percent annually, with 62.84 percent classified as domestic and 37.16 percent external.
Outlook
With non-oil revenues approaching parity with oil income, Ƶ’s fiscal structure is becoming increasingly resilient to energy price volatility.
Strong tax-based revenues, stable expenditure management, and the phased restoration of oil production position the Kingdom to maintain momentum in funding its Vision 2030 transformation agenda.
Continued expansion in tourism, logistics, finance, and manufacturing is expected to further solidify this trajectory in the second half of the year.
The International Monetary Fund’s 2025 Article IV Consultation reported that Ƶ’s non-oil real GDP grew 4.5 percent in 2024, driven by strong performance in retail, hospitality, and construction.
Growth in the non-oil economy is projected to reach 3.4 percent in 2025, supported by robust domestic demand fueled by government-led Vision 2030 projects and solid credit expansion, even amid softer commodity prices.
While lower oil revenues and investment-related imports have resulted in the emergence of twin deficits, the IMF noted that the Kingdom continues to maintain ample external and fiscal buffers.
Overall, real GDP is expected to rise 3.6 percent in 2025, aided by the gradual reversal of OPEC+ production cuts, with oil output forecast to reach 9.5 million barrels per day in July and continue increasing thereafter.
The fiscal deficit is anticipated to peak at 4 percent of GDP in 2025 before narrowing to around 3.2 percent by 2030, with borrowing expected to be the primary financing source.
Public debt-to-GDP is projected to remain moderate, at 40.6 percent by the end of the decade, which will remain consistent with a low sovereign debt risk according to the IMF.
