https://www.agbi.com/ :Saudi Arabia’s budget deficit grew in the third quarter of 2026, surpassing the government’s full-year target, Finance Ministry data shows.

Pressure on public finances from the US-Iran war and a seasonal rise in spending are likely to widen the gap further by year-end although a drop in oil receipts may reflect accounting arrangements with Saudi Aramco rather than weaker underlying earnings, economists said.

The shortfall between government revenue and spending hit $22 billion across July, August and September, more than double that recorded for the second quarter.

For the first nine months of the year the deficit hit $65 billion, compared to the ministry’s full-year target of $44 billion.

Oil revenue fell nearly 40 percent in the third quarter compared to the previous quarter, although economists said such income could bounce back before the end of the year.

“The surprise was lower oil revenues,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank. “We were expecting an increase.”

While oil exports and production are down compared to last year, state energy giant Aramco has recorded larger profits on oil prices that have averaged 40 percent higher than in 2025.

Aramco, along with other Gulf oil companies, has had to sell crude at a discount due to higher risk and logistics costs. However, the third-quarter drop in oil revenue probably stems from an accounting measure between Aramco and the government, Malik said.

“It likely reflects the tax being offset against payments the government owes to Aramco,” she said. “I don’t think it reflects the fundamentals.”

She expects oil revenue to bounce back in the fourth quarter and a “moderate narrowing in the deficit” for this year compared to last.

The deficit has already grown to nearly 150 percent of the full-year target as Saudi Arabia grapples with the economic fallout from conflicts with Iran and the Houthis.

Real GDP fell in the third quarter by 4 percent, a slight improvement compared to the previous quarter.

While the Finance Ministry curbed spending in the third quarter compared to the second quarter, the war has put pressure on the government budget, with military expenditure ticking higher.

Spending could increase still further this year, said Tim Callen, visiting fellow at the Arab Gulf States Institute in Washington and former International Monetary Fund mission chief to Saudi Arabia.

Government spending is typically highest in the final quarter