Cooling Inflation and Capital Inflows Reshape the Saudi Outlook

Welcome to another edition of Weekly Insights, our regular newsletter summarising key economic, investment, corporate, and policy developments shaping markets in Saudi Arabia and globally. This week’s edition highlights inflation dynamics in the Kingdom, major investment trends, regulatory and operating developments in industry, entertainment sector signals, and energy market movements.

Inflation in Saudi Arabia Continues to Moderate

Saudi Arabia’s consumer price inflation moderated in November 2025, with the Consumer Price Index (CPI) rising 1.9% YoY compared with a 2.2% increase in October. This represents the first move below the 2.0% threshold in several months and reflects a broad softening of price pressures as the year draws to a close. The data, released by the General Authority for Statistics (GASTAT), showed only a modest 0.1% MoM increase in the CPI.

Housing costs remained the largest contributor to headline inflation, driven by a 5.4% YoY rise in actual rents, although this was the lowest annual housing inflation since late 2022. Food and beverage prices increased by 1.3% and transport costs rose 1.5% on an annual basis. Conversely, several categories displayed price declines or minimal increases, including furnishings and household equipment which fell, and restaurants and accommodation services which posted a mild contraction.

This deceleration aligns with expectations from some private sector forecasts that inflation will continue to ease into 2026 as housing pressures fade further and global energy prices contribute to softer fuel inflation. Broader macroeconomic projections from international institutions also suggest inflation near or below the Saudi Finance Ministry’s forecast of around 2.0% next year.

Global Capital Flows and Strategic Investment in Saudi Infrastructure

In a sign of enduring investor confidence, I Squared Capital, a US-based infrastructure investment manager, is doubling down on regional commitments with plans for infrastructure contracts worth up to USD 300 million in Saudi Arabia in early 2026. These deals, spanning renewable energy, data centers, and fiber optics, are part of a broader USD 500 million allocation the firm has earmarked for the Kingdom. This represents half of its targeted USD 1 billion regional commitment, reflecting a clear strategic emphasis on the Saudi market. The firm’s plans include establishing a local office in Riyadh and launching a dedicated infrastructure fund, supported by Memoranda of Understanding with partners including the Public Investment Fund and the Arab Energy Fund.

Chairman Sadiq Wahba has publicly characterised Saudi Arabia as the region’s most attractive investment destination given its sizeable domestic market, ambitious infrastructure programs, and favourable returns when evaluated with disciplined risk assessment.

Entertainment Sector: Early Planning for Universal Studios Park

The Kingdom continues to attract global entertainment brands as part of its economic diversification and tourism development strategy. According to reporting in the Wall Street Journal and subsequent confirmations in other outlets, Universal Studios is in early planning stages to build a new theme park in Saudi Arabia. The initiative, which is in concept phase, may be financed through a licensing agreement with a government-backed entity and is likely to be located within the Qiddiya entertainment and sports complex near Riyadh.

While no definitive deal has been announced, this development signals increasing competition in the Middle East entertainment landscape. It follows Disney’s announcement earlier in 2025 of a major theme park project in neighbouring Abu Dhabi. The potential Universal park could take years to complete, but its consideration underscores Saudi Arabia’s strategic positioning as a regional hub for tourism and leisure investment.

Industrial Policy Update: Expat Levies Removed for Manufacturers

In a practical operational development for the industrial sector, the Saudi cabinet has permanently eliminated expat levies on licensed industrial facilities. These levies, introduced in 2018 as part of fiscal balancing and localisation efforts, were previously waived for manufacturers through a series of temporary extensions. Under the old regime, costs for facilities employing expatriates could have escalated significantly if the waiver had expired. The permanent repeal is seen by industry leaders as a reduction in regulatory uncertainty and a positive signal for manufacturing expansion, automation investment, and technology adoption.

For asset allocators and operating partners engaged in industrial equity or private credit strategies, this policy shift materially improves the medium-term cost base for manufacturing enterprises.

Energy Markets: Elevated Exports Despite Signs of Glut

Saudi Arabia’s oil exports to key markets in Asia and the United States are rising even as global supply appears well supplied. Recent shipment data show volumes to China at multi-month highs and projected loadings to the United States reaching levels not seen since 2022. Japan has also experienced elevated shipments. These flows are occurring against a backdrop of record crude inventories at sea, exceeding 1.3 billion barrels, and forecasts from the International Energy Agency pointing to a notable surplus in 2026. This environment has kept benchmark prices under pressure, with Brent and West Texas Intermediate futures set for a second consecutive weekly decline amid concerns that demand growth may lag rising supply.

Closing Thoughts

This week’s developments paint a portrait of an economy balancing stability with transition. Inflation metrics suggest that underlying price pressures are easing, industrial and investment policies are evolving to support sustainable growth, and foreign capital continues to view Saudi Arabia as a core opportunity set within the broader Middle East region. Strategic diversification into sectors such as entertainment and technology infrastructure complements continued leadership in energy markets.

Sources

• Inflation in Saudi Arabia Continues to Moderate: GASTAT

• Global Capital Flows and Strategic Investment in Saudi Infrastructure: I Squared Capital

• Entertainment Sector: Early Planning for Universal Studios Park: Reuters

• Industrial Policy Update: Expat Levies Removed for Manufacturers: Arab News

• Energy Markets: Elevated Exports Despite Signs of Glut: Bloomberg