Morgan Stanley Cuts Saudi Arabia 2026 GDP Forecast to -1.8%

Morgan Stanley lowered Saudi Arabia's 2026 GDP growth forecast to -1.8%, pointing to a prolonged oil supply disruption that delays export normalization into the second quarter of 2027. The downward revision reflects serious headwinds for the kingdom's energy sector, while non-oil economic activity continues to expand.

Crude production is projected to average approximately 6.3 million barrels per day in the fourth quarter of 2026. According to an Investing.com report, this trajectory will drive a 28% year-over-year contraction in oil activity and a 17.8% contraction in full-year oil GDP.

Understanding GDP Forecast Adjustments and Fiscal Revenue

Economic output in resource-dependent economies typically swings in tandem with production quotas and export infrastructure timelines. The projected contraction for 2026 stems directly from constrained output levels, which limit petroleum export earnings and state revenue generation.

Financial analysts at the bank expect oil fiscal revenue to reach 685 billion Saudi riyals in 2026 before recovering to 740 billion riyals in 2027. These figures illustrate the direct fiscal impact of the extended disruption on public finances.

Non-Oil Sector Resilience and 2027 Recovery Outlook

Despite the sharp pullback in energy output, non-oil sectors display ongoing stability. Non-oil activities are projected to grow by 3% in 2026, supported by domestic demand and private sector initiatives. The Saudi Purchasing Managers' Index (PMI) sat firmly in expansion territory at 53.8 in August.

Looking ahead, the analysis anticipates a sharp rebound in 2027. Oil GDP is forecast to expand by roughly 23% as production and export capacities gradually normalize.

In the public markets, Morgan Stanley (NYSE: MS) stock traded at $190.02, up 1.38% as of October 9, 2026, according to Finnhub market data.