Saudi debt could reach 60% of GDP by 2030 in oil-price case

Saudi debt could reach 60% of GDP by 2030 under a Capital Economics scenario, raising pressure on borrowing costs and spending.

The consultancy's warning is conditional, not a baseline from the Saudi government. It assumes the crude price jump tied to the closure of the Strait of Hormuz fades, leaving oil prices lower over the next few years.

A 60% debt case

Capital Economics said Saudi Arabia's debt ratio is still low compared with many economies, but the direction matters. A sustained rise would make the kingdom more dependent on bond markets at the same time it is funding large economic transformation projects.

The gap between forecasts is large. Capital Economics sees debt potentially reaching 60% of GDP by 2030, while the Saudi government's own projection puts debt at around 33% of GDP by 2028, compared with 32% now.

That difference turns on oil revenue, spending discipline and the pace of non-oil growth. If oil prices retreat, the government has less revenue to finance investment without issuing more debt or trimming outlays.

Oil prices shape Riyadh's room

Saudi Arabia's fiscal position remains closely tied to crude markets even as officials emphasize the expansion of the non-oil economy. The Strait of Hormuz assumption matters because the waterway is central to Gulf energy flows, so disruption can lift prices temporarily.

If that price support fades, the budget math changes. Lower crude prices would reduce the cash available for state-led projects, while higher borrowing could raise debt-service costs and narrow the space for other spending priorities.

The government has said its borrowing is aimed at financing economic transformation rather than covering routine weakness. That distinction matters for investors because productive investment can support future growth, while persistent deficit funding can make markets more sensitive to debt levels.

Private credit faces pressure

Capital Economics also flagged a crowding-out risk. If the state borrows more heavily, banks and investors may allocate more capital to government debt, leaving less room or higher costs for private companies seeking funding.

For Saudi firms, the effect would depend on how quickly public investment translates into non-oil activity. If government projects generate contracts, jobs and new revenue streams, private companies could benefit even as sovereign borrowing rises.

If borrowing costs climb faster than non-oil growth, the squeeze could be sharper. Companies outside state-backed projects would be most exposed because they may face tighter credit while consumer and business demand adjusts to slower public spending.

Three paths for 2030

One scenario is a higher-for-longer oil price environment. If crude prices stay elevated after the Hormuz shock, global energy costs would remain a headwind for importers, Saudi Arabia would have more fiscal room, and Gulf-linked contractors and banks could see steadier project financing.

A second scenario is the one emphasized by Capital Economics: the oil spike fades and prices decline. In that case, the global macro effect would be disinflationary for oil importers but tougher for exporters; Saudi Arabia could borrow more, and the domestic private sector could face stronger competition for capital.

A third path is earlier fiscal tightening. If Riyadh slows spending to contain debt, the sovereign balance sheet would be less exposed, but near-term demand in construction, finance and services could weaken, and the pace of non-oil diversification would become the central test.

The open questions are practical rather than abstract: where oil prices settle, how much borrowing Saudi Arabia chooses, and whether non-oil growth can reduce the budget's reliance on crude income. Those variables will determine whether the debt path stays near the government's forecast or moves closer to the consultancy's stress case.