Saudi Arabia Economy: Analysis of Current Economic Performance

This report examines the current economic performance of Saudi Arabia, focusing on key indicators such as Gross Domestic Product (GDP), inflation rate, and unemployment rate. The analysis reveals that Saudi Arabia's GDP has experienced growth, recovering from past financial crises. However, ...Read More

Running Head: SAUDI ARABIA ECONOMY
CURRENT PERFORMANCE IN SAUDI ARABIA
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SAUDI ARABIA ECONOMY 2
Introduction.
The current performance of Gross Domestic Product, inflation rate and unemployment
rate in Saudi Arabia is performing well currently (Samargandi, 2014). The government policy of
Saudi Arabia is focusing on economic development which will be able to increase economic
growth. This task will describe and analyse how the inflation rate, unemployment rate and GDP
are performing a case study of Saudi Arabia economy.
Gross Domestic Product
The economy of Saudi Arabia is currently beginning to heal from the past challenges of
financial crisis (Ramady, 2010). The Gross Domestic Product in January, February and March of
2018 has grown up to 1.2% compared to last year. This was according to the report released on
Sunday. According to the authorities, the GDP is expected to increase to 3.7% this year. Two
industrial cities have been constructed which will encourage shipping industries and new
refining. The Kingdom of Saudi Arabia has spent a high percentage of GDP on military and in
the whole world, it has 7th largest military expenditures (Al Rahl, 2012). These expenditures
amounted to 48.2 USD Billion which is equivalent to 8.7% of GDP. With the continued high oil
prices, the government of Saudi has had surpluses in the past years and the estimate of 26.5%
GDP in 2011. The government is a net lender of about 13% of GDP and net borrower of 33.2%
of GDP.

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Inflation rate
The inflation rate in Saudi Arabia has increased earlier this year after the government
introduced the value added taxes and price rises. With the increase in oil prices, the government
has launched a programme to improve the modern farming, encourage agricultural research and
technology and irrigation technology. This has made the kingdom create new sources of
revenues (Samargandi, 2014). The high prices are also due to political factors such as the Libyan
civil war which was in 2011.The country has been looking forward to distant itself from the
reliance on oil industry. The price rise of food stuffs in Saudi Arabia has made the inflation to
increase last month (Niblock, 2015). The government of Saudi Arabia is investing largely to
expand the crude oil and natural gas production. There is also advanced infrastructure and other
services such as electricity, sanitation, drinking water, health and education which will foster the
expansion. The value of exports has increased from USD 251.5 billion to 365 USD billion due to
high average oil prices. Of all the exports, oil exports are represented by 87%. The foreign aid in
Saudi is distributed through relief aid, debt relief, grants and soft loans.
Unemployment rate
The unemployment rate in Saudi Arabia is reported to be rising and the prince of the
Kingdom, Mohammed bin Salman has organized a plan of creating private sector jobs in the
country. According to Mr. Kattan there is increasing unemployment and increasing number of
visas, this means the government is creating jobs but they don’t offer them to the citizens
(Ramady, 2010). The government is targeting to create 450000 jobs by 2020 and 45% of private
sector jobs are under construction (Alkhathlan, 2013). The unemployment rate is about 10.5%
where the labour force participation is about 36%. This is because women have been restricted to
work but the rate is higher than the indicated 10.5%. The youth unemployment rate of young

SAUDI ARABIA ECONOMY 4
people is higher with a percentage of 30 and higher for women (El Mallakh, 2015). With the
reduction of birth rates, the number of youths entering the labour market have increased hence
leading to an economic challenge. Of all the employed people in Saudi Arabia, 80% work for the
government where 80% of the labour force sector are not from Saudi. This is because the wages
of the Saudi employees are 3.6 times those of the non-Saudis. By the foreigners coming to work
in Saudi Arabia, they have reduced the wages of the Saudis hence leading to economic stress for
the people. The government has already placed about 380000 Saudis in the private sectors and
limited the foreign workers to 6 years’ employment (Samargandi N. , 2014). The government is
also ensuring that the Saudis are trained and motivated so as to acquire the skills they need to fit
in the higher positions in the employment sectors and issuing enough work visas.
Conclusion
The economy of Saudi Arabia has healed from the past financial crisis where GDP has
grown to 1.2% compared to last year and the inflation rate has increased because the government
has introduced value added taxes. There are projects under construction which have reduced the
unemployment rate in Saudi Arabia. A higher percentage of GDP in Saudi Arabia is in the
military sector and the number of unemployment rate is higher in the women due to their
restrictions to work. The government is training people to fill the higher positions in the labour
market. The increase in prices of oil has increased the inflation rate in Saudi Arabia. The
government policy is hence focusing on economic development which will be able to increase
the economic growth in the Kingdom.

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References
Al Rahl, A. (2012). Economic Development in Saudi Arabia . Routledge.
Alkhathlan, K. (2013). Energy ,consumption,carbon emissions and economic growth in Saudi
Arabia:An aggregate and disaggregate analysis. Energy Policy,62(2), 1525-1532.
El Mallakh, R. (2015). Saudi Arabia:Rush to Development(RLE Economy of Middle
East):Profile of an energy economy and investment. Routledge.
Niblock, T. (2015). State,society and economy in Saudi Arabia(RLE Saudi Arabia). Routledge.
Ramady, M. (2010). The Saudi Arabian economy:Policies,achievements and challenges.
Springer Science & Business Media.
Samargandi, N. G. (2014). Financial development and economic growth in an oil-rich
economy:The case of Saudi Arabia. Economic Modelling,43(2), 267-278.