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Saudi Arabia’s new season of fruitfulness

22 August 2025

Commentary
Edmund O’Sullivan
Former editor of MEED

This autumn will be a season of challenge and possible fruitfulness for Saudi Arabia, which is emerging from the regional crisis sparked by the war in Gaza with its economy and global standing largely unscathed.

The opportunity is capitalising on its position as a major investor when governments across the globe are crying out for foreign money. The challenge is leveraging the kingdom’s relationship with US President Donald Trump to encourage him to break with Israel’s Benjamin Netanyahu.

Saudi Arabia’s economic foundations are solid. Its GDP this year will be more than $1tn, almost twice that of Israel, the Middle East’s second-biggest economy. 

The Washington-based IMF forecasts Riyadh’s budget deficit this year will hit 4% and the current account deficit will be under 3%. The public debt to GDP ratio is forecast at 30%, the assets of the state-owned Public Investment Fund are close to $1tn and oil output is up to 9.5 million barrels a day. And while other economies struggle with higher US tariffs, the IMF said in August that their impact on Saudi Arabia will be close to zero.

Saudi Arabia rarely acts in haste and recognises that reversing America’s Middle East policy will take time as well as diplomacy

In contrast, leading economies are struggling with the biggest debt burden since 1945. In Canada, Italy, Japan, Spain, the UK and the US, the sovereign debt-to-GDP ratio is above 100% and trending higher. All are looking for lenders and Saudi Arabia fits the bill.

The kingdom’s economic clout is the key element in its efforts to convince Washington to change course about Palestine. But it also co-hosted a New York conference about the two-state solution in July and signed the New York declaration calling for a 15-month phased plan for a demilitarised and sovereign Palestine. 

Saudi Arabia has repetitively affirmed its opposition to normalisation with Israel before there is a commitment to a Palestinian state.

Diplomatic patience

Riyadh has also refused to squander political capital, criticising Trump for America’s failure to end the killing and ethnic cleansing in Palestine. Saudi Arabia rarely acts in haste and recognises that reversing America’s Middle East policy will take time as well as diplomacy.

It will also probably require a shock that US voters cannot ignore. In the financial year that ended last September, Washington spent $882bn on debt service – close to a quarter of the government’s annual revenue and more than its expenditure on Medicaid and defence. There is a growing consensus that this trend is unsustainable.

Saudi Arabia of course does not want a Western sovereign debt crisis. But it is better placed than most to help if one comes. And it will expect a return in more ways than one when it does.

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More from Edmund O’Sullivan:

> The economics of long war
> A farcical tragedy that no one can end
> Dealmaking trumps the Truman Doctrine
> Trump’s new world order
> Is this the end for Middle East studies?
> Trump’s foreign policy shakes global relations
> Between the extremes as spring approaches
> A leap into the unknown
> Middle East faces a reckoning
> Biden leaves a mixed legacy

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Edmund O’Sullivan

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