Where is Saudi Arabia's economy heading?

Abstract

Purpose

The purpose of the paper is to forecast economic indicators of the Saudi economy in the context of low oil prices which have taken a toll on the Saudi oil-dependent economy between 2014 and 2017. Trades and investments have plummeted, leading to significant budget deficits. In response, the government unveiled a plan called Saudi Vision 2030 in 2016 which has triggered structural economic reforms leading to an unprecedented strategy of transition from an oil-driven economy to a modern market economy.

Design/methodology/approach

This paper forecasts with spectral analysis economic indicators of the Saudi economy up to 2030 to provide a clearer picture of the future economy assuming that the effects of recent reforms have not yet been traced by most of the economic indicators.

Findings

2018–2030 forecasts are all bearish except West Texas Intermediate (WTI) oil price expected to average $64.40 during the period 2019–2030. Two additional exceptions are the Saudi population that should grow to 40 million in 2030 and the swelling gross domestic product (GDP) generated by the non-oil sector resulting from bold actions of the Saudi government who is willing to become less dependent on revenues generated by the oil sector.

Research limitations/implications

Government policymakers, economists and investors would have with spectral forecasts better insight and understanding of the Saudi economy dynamics at the early stage of major economic reforms implemented in the country. In 2020, the COVID-19 pandemic has brutally hurt the Saudi economy following a collapse in the global demand for oil and an oversupplied industry. The impact on the Saudi economy will depend on the optimal response brought by its government.

Social implications

Saudi Vision 2030 plan has already triggered a deep transformation of the Saudi society that is reviewed in this paper.

Originality/value

The forecast of Saudi economic indicators is a timely topic considering the challenges facing the economy and reforms being undertaken. Applying an original forecasting technique to economic indicators adds to the originality of the paper.

Citation

Rostan, P. and Rostan, A. (2021), "Where is Saudi Arabia's economy heading?", International Journal of Emerging Markets, Vol. 16 No. 8, pp. 2009-2033. https://doi.org/10.1108/IJOEM-08-2018-0447