Saudi Arabia's industrial production hits 2023 peak, sustaining overall economic growth momentum.
Saudi Arabia's economy is poised for growth, with the International Monetary Fund (IMF) predicting a 3.6% expansion in 2025 and a 3.9% increase in 2026. This growth is attributed to diversification efforts and a rise in oil production levels, as well as the continued phase-out of OPEC production cuts.
However, the anticipated OPEC+ production increases in 2025 and 2026 are expected to contribute to a rise in global oil supply. This increase could put downward pressure on oil prices, potentially limiting the positive impact on Saudi Arabia’s industrial output and economy during this period.
According to the U.S. Energy Information Administration (EIA), Brent crude prices are expected to decline to about $58/barrel in late 2025 and average just above $50/barrel in 2026 due to rising oil inventories from increased production by OPEC+ countries like Saudi Arabia. This price decline suggests pressure on oil revenue for Saudi Arabia.
Despite this challenge, the increase in oil production could stimulate industrial output related to oil extraction, refining, and associated industries within Saudi Arabia. During the second quarter of 2023, Saudi Arabia's economy grew by 3.9% compared to the same period last year, with the rise in the Industrial Output Index driven by a 7% increase in manufacturing and a 6% increase in mining and quarrying activities.
Manufacturing activity saw a significant boost in June 2023, with a 11.1% increase supported by a 15.3% increase in the manufacture of coke and refined petroleum products, and a 18.7% rise in the manufacture of chemicals and chemical products. Mining and quarrying activities, including upstream oil and gas sector output, also increased by 6% in June 2023 compared to the same month in the previous year.
Electricity, gas, steam, and air-conditioning supply activity recorded an annual increase of 8.6% in non-oil activities and 7.7% in oil activities in June 2023. The kingdom is expected to keep its non-oil growth above 3.5% over the medium term, as a result of its Vision 2030 economic programme.
OPEC+, led by Saudi Arabia and Russia, has been increasing crude production since April 2023. In April, OPEC+ increased production by 138,000 barrels a day, with 411,000 bpd each in May, June, and July. OPEC+ agreed to raise production for August and September by 548,000 bpd and 547,000 bpd respectively.
As Saudi Arabia navigates this complex global market environment, it will need to strike a balance between increased production volumes and lower price realizations to maintain its economic growth and industrial expansion. The net effect will likely reflect a trade-off between higher volumes and lower prices, with the potential for slower growth compared to previous high-price periods.
References:
- OPEC Annual Statistical Bulletin 2024
- IMF World Economic Outlook Update, July 2025
- EIA Short-Term Energy Outlook, August 2025
- Gastat Saudi Arabia Economic Indicators, Q2 2023
- The IMF predicts Saudi Arabia's economy will grow by 3.6% in 2025 and 3.9% in 2026, attributed to diversification, oil production, and OPEC cuts.
- However, OPEC+ production increases in 2025 and 2026 could increase global oil supply, putting pressure on oil prices and potentially limiting industrial output growth.
- According to the EIA, Brent crude prices are projected to decline to $58/barrel in late 2025 and $50/barrel in 2026 due to increased production by OPEC+ countries like Saudi Arabia, which may impact oil revenue.
- Despite this challenge, increased oil production could stimulate industrial output related to extraction, refining, and associated industries within Saudi Arabia, as evident in the Q2 2023 growth of 3.9%.
- In June 2023, Saudi Arabia saw a 11.1% increase in manufacturing, including coke and refined petroleum products, chemicals, and a 6% increase in mining and quarrying activities, including upstream oil and gas sector output.
