RIYADH (The Thursday Times) — Saudi Arabia’s economy is likely to shrink by 2.8% this year before rebounding to growth of 5.1% in 2027 and 6% in 2028, Moody’s said in its latest global economic outlook, assuming a gradual recovery in the kingdom’s oil production and exports.
The ratings agency’s figure for this year is gloomier than the 1.8% contraction the OECD projected for the kingdom in September.
Moody’s said economies in the Gulf Cooperation Council remained particularly exposed to the fallout from the war involving the United States, Israel, and Iran, especially those with little capacity to send oil and gas through pipelines that bypass the Strait of Hormuz.
Government support had kept non-oil activity going, the agency said, but the conflict had damaged perceptions of regional stability that had helped the Gulf attract foreign investment and tourists. Nine months into the war, it said, the prospects of a swift or lasting resolution remained uncertain.
Moody’s expects Brent crude to average $90 a barrel in 2027, supported by higher geopolitical risk premiums and the need to rebuild depleted inventories. Those pressures would keep prices up even if tensions eased, it said.
The agency cited independent estimates that oil and refined product exports through Hormuz had recovered to about two-thirds of pre-war levels, though flows remained highly volatile. It also pointed to a rise in so-called dark fleet operations, with tankers moving oil through the Omani corridor with their transponders switched off, reportedly under the protection of US military escorts.
Iran has stepped up attacks on ships to raise the risks and costs of the southern route and to reassert control over the waterway, Moody’s said, adding that the first three weeks of October saw more attacks than any comparable period since the war began. Tanker freight rates and war-risk insurance premiums have risen sharply. On some days traffic nears pre-war levels as ships gather to cross the Omani corridor, the agency said, while on others it slows almost to a halt.
In a separate emerging markets outlook, Moody’s put the United Arab Emirates at the top of its 2027 growth table, with expected expansion of 8.2%, ahead of India and Vietnam at 7% and Saudi Arabia and Egypt at 5.1%. It said both Gulf states had entered an expansion phase in data centres and other digital infrastructure.
The outlook comes in the same week as Fitch’s decision on Friday to keep the UAE’s rating at AA- while forecasting that its non-oil economy would shrink this year. The International Energy Agency said on Thursday that the global oil market had swung back into surplus as Gulf exports recovered.
