Inroduction

When it comes to Arab countries, Saudi Arabia has the greatest economy and the most wealth.
The government's programme of massive public works projects, along with FDI and a stable
banking and financial system, has propelled the country to the top of the regional economy
rankings and into the ranks of the world's greatest economies. Yet, Saudi Arabia's GDP growth is
tightly correlated with real oil growth because the country's economy is virtually totally
dependent on oil.

The United Arab Emirates, China, India, Egypt, and the United States are Saudi Arabia's primary
export markets.

Economic Outlook

As the greatest oil producer and exporter, the country has a special place in the international
energy market. Its policies on the production and export of oil, petroleum products, and natural
gas have an impact on the energy market and the world economy. The nation understands its role
and is dedicated to maintaining pricing and supply stability. Fiscal stimulus, rapid immunisation,
and rising oil prices are expected to boost real GDP growth by 4.8% in 2022, according to an
estimate by GlobalData. Increases in omicron variant and government borrowing could slow
economic growth in 2022. Liberalizing social standards and enhancing government services is
just one of Vision 2030's many goals. Another is diversifying the economy away from
hydrocarbons and promoting job creation by encouraging the non-oil private sector to take an
active role. The government's goal is to expand foreign investment, the participation of small and
medium companies (SMEs), and the contribution of SMEs to Saudi Arabia's GDP from 20% to
35% in order to fulfil the goal of economic diversification under Vision 2030. As of October
2021, the Kingdom will have developed six major landmark projects with a combined value of
$7.0 trillion as part of Vision 2030, which aims to diversify the economy and attract more
foreign investments.

Saudi Arabia's budget surplus is predicted to exceed USD 161.52 billion in 2022 due to the
country's reliance on oil earnings. It is projected that by 2024, the surplus will have shrunk to
USD 103.94 billion, from USD 122.69 billion in 2023. (IMF, 2023). Public debt was increased
from 30% in 2021 to 24.8% in 2022 as a mechanism to lessen the impact of COVID-19 on the
private sector. In 2023 and 2024, the debt-to-GDP ratio is projected to reach a stable 25.1% and
24.6%, respectively (IMF, 2023). Partially as a result of the increase in the VAT rate from 5% to
15%, inflation accelerated to 3.1% in 2021, followed by 2.7% in 2022. In the future years, it is
expected to level off at approximately 2% (2.2% in 2023 and 2% in 2024).

With a GDP per citizen of about $27,941, Saudi Arabia has a high level of life even among
Middle Eastern countries (MF, 2023). Data from the Saudi General Administration for Statistics
show that in the third quarter of 2022, the unemployment rate for Saudi nationals rose to 9.9%,
up 0.2% from the previous quarter, while the unemployment rate for all of Saudi Arabia stayed
steady at 5.8%. Although the unemployment rate is higher overall, it is especially high for
women.

In 2022, foreign commerce accounted for 59% of Saudi Arabia's GDP, ranking the country as the
world's 26th largest exporter and the 32nd largest import market (World Bank, 2023). In 2020,
petroleum products and petrochemical products (propylene, ethylene, etc.) will account for
roughly 78.6 percent of all exports. The majority of imports are made up of machinery and
electrical equipment, followed by automobiles, chemicals, and metals. 

Political outlook

The political system in Saudi Arabia is a unitary absolute monarchy[1] based on Islamic
principles, with the King serving as both the head of state and the head of government. The King,
the Council of Ministers, and the country's traditional elites all participate in decision-making
discussions. The Saudi regime is generally viewed as tyrannical by its detractors.

Although the Basic Law of Saudi Arabia, the country's de facto constitution enacted by royal
decree in 1992, states that the king must abide by Sharia (Islamic law) and the Quran,[8] Saudi
Arabia is ruled by an absolute monarchy. The constitution of the country is officially proclaimed
to be the Qur'an and the Sunnah.

There is a stable monarchy in the country, but no functioning democracy. Since 1932, Saudi
Arabia has been ruled by members of the Al Saud dynasty. Governmentally, the country is
secure since the King exercises absolute authority. In 2020, Saudi Arabia rated 62.9 percentile on
the World Bank's Global Governance Indicators' control of corruption criteria, followed by
regulator quality (61.5) and government effectiveness (62.9). (58.6). Corruption prevention
assesses how much government resources are misused for personal gain. The effectiveness of the
government in creating and enforcing policies and rules that allow for and encourage growth in
the private sector is a key indicator of regulatory quality. 

Economic growth

After suffering a pandemic-induced recession in 2020, Saudi Arabia is expected to have one of
the world's fastest-growing economies this year because to significant pro-business measures and
a dramatic surge in oil prices and production. According to our most recent Article IV
consultation report, we anticipate GDP growth of 7.6 percent, the strongest expansion in in a
decade.

Inflation would remain under control at 2.8% in 2022 despite rising pricing for imported
commodities due to central bank tightening in line with the US Federal Reserve. More non-oil
revenue and bigger revenues from oil exports will significantly bolster public finances and the
external situation. Safety nets will continue to be plentiful.
It will be crucial to keep public spending under control despite increased oil revenues, but there
is room for more targeted social expenditure. Supporting fiscal consolidation would be a better
collection of revenues from sources other than oil production through better tax policy and
revenue administration.

In order to achieve fiscal sustainability and avoid a return to prior oil-driven cycles of boom and
bust, it is important to manage oil revenues in a sustainable manner so that spending does not rise
and fall in line with the price of oil. Budgetary foresight and economic diversification strategies
might also help.

Accelerating to 7% in 2022, growth is forecasted to slow to 3.8% and 3.0% in 2023 and 2024.
The conclusion of the OPEC+ production cuts in December 2022 will be the catalyst for a 13%
increase in oil output, which is widely seen as the primary driver of the rebound. Forecasts put
growth in the non-oil industry at 4% in 2022 and 3.2% over the next few years. Stronger private
consumption, an uptick in religious tourism, and more domestic capital spending—signaled by
the PIF and other state agencies—are expected despite headwinds from stricter fiscal and
monetary policy in the long term. A combination of a strengthening US currency (to which the
Saudi Riyal is tied) and more restrictive monetary policy should cause headline inflation to
moderate and stabilise around 2% in 2022..

Reform policies and priorities

The Kingdom of Saudi Arabia has taken significant measures to boost its business climate, entice
foreign investment, and boost private-sector employment. There has been an increase in the
number of industrial facilities and the proportion of women in the labour force as a result of
these initiatives, as well as reforms to government and the labour market.

Transportation subsidies of up to 80% of the cost of a taxi ride, company incentives for hiring
Saudi women, and childcare support have all contributed to increased female labour force
participation alongside the removal of formal barriers and legislation protecting equality of
employment. So, the percentage of Saudi women in the workforce has increased by 100% over
the past four years, to 33%, beating both the 30% goal established by the 2030 plan and the 27%
regional average.

With a young, tech-savvy workforce, rising levels of digitalization might significantly increase
output. Through and online health services, virtual courts, distance learning, and an internet
finance platform called Etimad for public procurement all accelerated during the pandemic.
The future of Saudi Arabia's economy is bright. Keeping the reforms moving forward is critical
to the long-term success of the Kingdom.

Five-year plans have been implemented to guide economic growth over the long term. Much of
the country's foundational transportation and communications infrastructure was built during the
first two five-year plans (1970–1975 and 1976–1980). After that, strategies were developed to
broaden the economy's base of support, boost domestic food production, enhance public
institutions like schools and hospitals, and modernise interregional communication networks.
The economic expansion, however, did not come free of cost. Government initiatives
encouraging larger families led to a significant increase in population as international oil prices
remained flat during the 1990s. The GDP per capita started falling in real terms, and for the first
time, the young, highly educated workforce in the kingdom was threatened by high
unemployment and underemployment rates. Yet as oil prices increased again, those tendencies
began to reverse. Also, five-year plans were aimed at expanding the role of private enterprise to
reduce reliance on oil exports and boost employment.

Overall performance compared to other countries

According to the GCRI Q4 2021, Saudi Arabia ranked 35 out of 136 countries. The score places
the country in the "low-risk" category of countries (between 30-40). When compared to other
countries in the Middle East and North Africa, as well as the global average, Saudi Arabia has a
lower GCRI Q4 2021 risk score. The country's total performance (in comparison to the average
of the Middle East and North Africa) was 33.7, with particularly strong showings in the
macroeconomic and legal criteria. Yet, the political and environmental risks were considerably
higher..