Economic studies
Saudi Arabia

Saudi Arabia

Population 30.8 million
GDP per capita 24,252 US$
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major macro economic indicators

  2013 2014  2015 2016 (f)
GDP growth (%) 2,7 3,6 3,4 1,5
Inflation (yearly average) (%) 3,5 2,7 2,0 3,9
Budget balance (% GDP) 8,7 -0,5 -16,2 -13,8
Current account balance (% GDP) 15,3 7,8 -6,3 -10,2
Public debt (% GDP) 2,2 1,6 5,8 17,3


(f) Forecast


  • A quarter of global oil reserves and largest OPEC producer
  • Predominant regional economic and political role 
  • Economy going through a diversification process and more open since joining the WTO end-2005  
  • Solid financial situation  
  • Robustness of the banking system


  • Significant dependence on the hydrocarbon sector where there is little job creation, and growing domestic energy consumption
  • High unemployment rate among Saudi nationals
  • Governance weaknesses hampering the business climate
  • Unstable geopolitical environment 


An economy that is suffering from the repercussions of the fall in hydrocarbon prices

In the first quarter of 2016, activity in the non-oil sector weakened by 0.7%, according to the estimations of the Saudi Institute of Statistics. However, in volume, oil production growth (+5.1%) has been able to offset the weak performances of the non-oil economy. Growth is expected to remain fairly sluggish for the rest of the year.  The main causes of this slowdown have been, on the one hand, the cut in government spending and the reduced energy and water subsidies; on the other hand the liquidity crunch constraining funding conditions of the private sector. The reduction in subsidies led to a rise in inflation to 4.1%, thus limiting household purchasing power (increase in electricity and water bills). Furthermore, the rise of tobacco prices in March and the scheduled rise of soft drinks prices, inflation is likely to continue to increase in 2016.. . Household demand increased by 2.9%, well under the average growth of 9% recorded over the 2013-2015 period. Government spending dropped by 30% year on year, which would allow enable a reduction in the public deficit. However its level should remain very high. In this context, consumer confidence is expected to keep weakening. Consumer confidence index reached a low point in May, before slightly rebounding in July. The reduction in subsidies also affects the private sector growth through the rise in energy prices. The most affected sectors by the economic downturn are the construction and distribution sector, which respectively registered a decline of 1.9% and 0.8% in the first quarter. PMI index seems to indicate that this trend could last.


Increase in the fiscal deficit and in the current account balance.

Public revenues would continue to contract in 2016 due to the weakness of oil prices. Moreover, non-oil revenues will shrink as activity slows down. Customs duties can be expected to be adversely affected by the slowdown in imports. Current expenditure will remain constrained by the size of the public payroll. However, energy subsidies have been revised downwards further following to the increase of the oil price at the pump of 50 %.  During the presentation of the development plan Saudi Vision 2030, the government announced the launch of several privatisations which should include the opening of the petroleum monopoly capital, Aramco, along with the placing of public lands on the market. 

The current account deficit continues to increase considerably. The effects of the low barrel of crude low price continue to penalize exports of goods and services, which suffered a fall of 25% in the first quarter of 2016. Exports of goods contracted by 27%, while oil exports decreased by 33%. The fall in export revenues has only been slightly offset by the contraction of imports which declined by 14%. Thus trade balance deficit is expected to remain large. FDI could slow down because of the loss of confidence among investors following the downgrade of the country’s grade by several credit rating agencies.


New sovereign for a new political era

The country’s recent political history has been marked by the death of king Abdallah in January 2015. Crown prince Salman ben Abdelaziz Al Saoud was made king of the Saudi kingdom on 23 January 2015. This change of sovereign has led to a change in Saudi policy in both domestic and external terms. From a domestic policy viewpoint King Salman has carried out a significant reshuffle by appointing Prince Mohammed Ben Nayef, a former minister of the interior as his crown prince. Likewise, the son of King Salman Mohamed bin Salman has been appointed second in line to the throne. At the external level the kingdom has involved itself directly in the Yemenite political crisis by leading a coalition of Arab countries made up of its allies. The stalemate of the conflict in Yemen is creating a risk not only for internal security but for Saudi public finances.


Last update: July 2016

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