Riyadh: Saudi Arabia's economy contracted 4.8% year-on-year in the second quarter of 2026, marking the steepest decline recorded since the COVID-19 pandemic. This downturn was primarily driven by a significant decline in oil activity, which overshadowed modest growth in the non-oil and government sectors, according to official flash estimates released Thursday.

According to Anadolu Agency, the contraction represents a sharp reversal from the first quarter, during which the kingdom's real gross domestic product expanded by 3% annually. The General Authority for Statistics reported that oil activities plummeted by 24.7% compared to the same period last year, while non-oil activities experienced a slight growth of 0.6% and government activities increased by 0.9%.

The oil sector's downturn subtracted 5.4 percentage points from the annual GDP growth, whereas non-oil activities contributed 0.4 percentage points. Government activities and net taxes on products each added 0.1 percentage points to the growth.

On a seasonally adjusted basis, the real GDP fell 4.9% in the second quarter compared with the previous three-month period. This quarterly decline was largely driven by a 21.5% contraction in oil activities. Non-oil activities saw a decrease of 0.5%, while government activities rose by 0.2%.

Oil activities negatively impacted the quarterly GDP reading by 4.5 percentage points, with non-oil activities and net taxes on products subtracting 0.3 and 0.1 percentage points, respectively. The estimates, which take into account indicators such as production, expenditure, income, prices, and foreign trade, are typically released 30 days after the quarter ends.

These figures emerged amidst the war in the Middle East and a near halt in shipping through the Strait of Hormuz, which disrupted Saudi trade and oil exports, as reported by the International Monetary Fund. The IMF indicated that redirecting crude through the kingdom's East-West pipeline to Red Sea ports helped limit the decline in oil deliveries, while higher crude prices partially offset the lower export volumes.

The IMF projects that Saudi Arabia's economy will grow by 1.7% in 2026, with an acceleration to 5.5% in 2027, contingent on the gradual normalization of energy production and maritime transportation.