This report does not constitute a rating action. We project Saudi Arabia's real GDP will contract by 1.3% in 2026, driven by declining oil production and subdued non-oil growth. This will be followed by a sharp recovery of 8.0% in 2027. Our base case assumes disruptions to oil and gas flows via the Strait of Hormuz will continue into 2027, with export volumes remaining below pre-war levels. Saudi Arabia's ability to export via the Red Sea port of Yanbu, as well as its substantial net-asset position, provide critical buffers and support its creditworthiness. Similarly, banks'strong capitalization, solid profitability, and adequate liquidity will help them manage volatility. However, we forecast headwinds to sectors such as real estate, tourism, mining, and
