How the 2026 economic slowdown turned operational efficiency from an option into a strategic necessity

In periods of growth, rising demand covers inefficiencies inside companies. Revenue climbs, margins hold steady, and the cost of waste in procedures, of work repeated across departments, or of capital tied up in inventory never becomes visible. That cover recedes, however, when growth slows.

This year, the International Monetary Fund cut its outlook for the Saudi economy three times in succession, from growth of 4.5% in January to 3.1% in April and then 1.7% in July, before shifting in October from expecting growth to expecting an economic contraction of −3.3%. The Fund attributed the revision to the impact of regional tensions on energy production, exports, and transport.

A slowdown in economic activity naturally feeds through to demand, as companies hold back on expansion and purchasing, and consumers reorder their spending priorities. Costs, meanwhile, are moving in the opposite direction. According to the General Authority for Statistics, wholesale prices rose 4.6% year on year last August, while consumer price inflation did not exceed 1.8%. In other words, the cost of what companies buy is rising faster than their ability to raise the price of what they sell, and companies find their margins caught between slowing demand and rising costs.

Faced with this pressure, most companies turn to one of two options: wait for demand to pick up again, or scale back operations to adapt to current conditions. Waiting, however, drains the company’s reserves if the slowdown persists, while scaling back cuts the activities that generate profit and those that do not alike, so the company loses core capabilities and advantages it will need when it returns to growth.

Between these two options lies a third: performance optimization, by addressing the waste that growth had been concealing in three areas. At the level of operations and processes, departments working in isolation from one another, despite their interdependence, end up repeating the same tasks across multiple departments. Complex approval mechanisms obstruct even the simplest decisions that operating teams need to raise their performance. And when information is lost between one department and the next, work is redone to correct it, multiplying the cost of a single task to the company as a whole.

At the level of financial health, capital tied up in slow-moving inventory cannot be recycled to generate further returns. Overdue receivables leave the company financing its customers out of liquidity it needs itself. And contract terms agreed under different economic conditions bind the company to prices and obligations that no longer fit its reality.

At the level of technology and data, preparing reports manually consumes skilled people’s time in compiling rather than analyzing and improving. The absence of integration between different systems means the same data is entered more than once, and figures conflict from one department to another. Additional resources are wasted, and the company makes its decisions on outdated, inaccurate data that does not reflect its current reality.

Addressing this waste does not reduce the company’s capacity to produce and operate. It reduces the time, effort, and expense being wasted, so that the company reaches a higher level of operational efficiency with which to meet the pressures of this period.

When growth slows, performance optimization shifts from routine operational practice to an urgent strategy for meeting the new reality, as operational efficiency protects the company through the slowdown and positions it for growth when conditions improve, which the IMF expects in the years ahead.