The current period is very favourable for the Saudi economy due to high oil revenues and implementation of extensive reform and investment programmes. Nevertheless, despite real progress in diversification, activity remains vulnerable to oil market vagaries and OPEC production policy. A moderate upturn in activity is expected in 2024 after a slight recession this year. Oil revenues remain decisive for maintaining budgetary balance and implementing Vision 2030 investments [...]
Oil production feeds growth volatility in Saudi Arabia, as evidenced by the slowdown expected this year. Nevertheless, the non-oil economy is benefiting from the momentum of investment and household consumption against a backdrop of gradual transformation of the economy and the labour market. State intervention and a favourable exchange rate effect are keeping inflation at moderate levels [...]
The economic recovery should be sustained in 2022 due to the sharp increase in hydrocarbon production following the OPEC+ agreements and due to stronger growth in household consumption. The current oil trend is favourable to public finances, while the process of fiscal consolidation and revenue diversification is expected to continue. It has already led to a significant reduction in the fiscal breakeven oil price and therefore less exposure to oil market volatility [...]
Economic recovery is likely to be strong in 2022, driven by buoyant household consumption and rising oil GDP. Labour market reforms are having a positive effect on domestic demand, most notably via a significant increase in women’s participation rates. Inflationary risk remains moderate, even though wage pressures have increased recently. With the increases in oil prices and output, there is likely to be a budget surplus this year [...]
The Saudi economy took a double hit in 2020: the consequences of the Covid-19 pandemic amplified the recessionary impact of falling oil prices and production. In addition to the economic consequences, these two exogenous shocks have had negative consequences for the reform process, and particularly for the dynamism of the private sector. The recovery expected in 2021 will be timid, due to a further slowdown in oil activity [...]
The massive use of expatriate workers, a key element in the Gulf states’ economic models, has been called into question by the economic recession, widening budget deficits and employment nationalisation programmes, particularly in the public sector. The construction and services sectors, which also depend massively on foreign workers, are suffering as a result of cuts in public spending [...]
Non-oil GDP growth rebounded strongly in 2019 after three years of disappointing performances. Household consumption and public sector investment spending are the main growth engines driving the recovery. Economic prospects are still positive in the short term due to the slowdown in the pace of fiscal reforms. The fiscal deficit will remain high, although exceptional one-off income and the transfer of spending to extra-budgetary entities should help hold it down [...]
External liquidity is comfortable even though the recent years have been less favourable for external asset accumulation. Years of very high current account surpluses (almost 20% of GDP on average during 2005-2014) have resulted in a high level of FX assets at the central bank. In the short term, SAMA[1] FX assets are expected to decline for two reasons: More than a third of reserves (USD 181 bn in 2018) are government assets used to finance part of the fiscal deficit [...]
The Saudi economy has recorded weak performances over the past three years. It has had to deal with the combined impact of reforms undertaken as part of the Vision 2030 plan and rather unfavourable oil market conditions, which have eroded public finances. Non-oil GDP growth has been slowing since 2016 due to sluggish domestic demand. Activity should pick up gradually in 2019 thanks to fiscal stimulus efforts and the steady normalisation of the labour market [...]
Saudi Arabia is the world’s largest oil producer and exporter with almost one-fifth of the word’s proven oil reserves. Benefiting from abundant and cheap energy, the industrial sector has gained a leading position, notably in the petrochemical sector. Economic activity remains linked to oil revenues. The surge in US shale oil production has challenged the leading role of Saudi Arabia in the oil market until 2019.
Public debt is increasing and is largely compensated by public external assets (roughly equivalent to GDP). The SAR peg to the USD is strong. The country faces two important challenges in the medium and long term: to create enough private sector jobs for a large and growing population, and to reduce domestic energy consumption in order to preserve the oil export capacity. A national transformation plan (Vision 2030) is expected to accelerate the pace of reform and create new economic opportunities outside the hydrocarbon sector, notably with the development of new cities and of the service sector. The sovereign fund PIF is expected to partially finance those investments. Given the economic rigidity in Saudi Arabia, especially in the employment market, and limited economic competitiveness outside its energy-intensive industries, economic diversification is expected to progress very slowly.
Saudi Arabia is a member of the Gulf Cooperation Council (GCC) and the Organisation of Petroleum Exporting Countries (OPEC).