Introduction
Macroeconomics studies the behavior of the economy, as well as its major sectors, such as the public and private sectors, and the monetary system, as well as the relationships between the most significant general economic indicators. There is unemployment and underutilization of productive capacity in a market economy. Furthermore, the price level is unpredictable and fluctuating; as a rule, they rise, resulting in inflation. The national currency’s exchange rate fluctuates, the size of exports and imports shifts, and foreign exchange receipts rise or fall (Dieye, 2020). As a result of the decrease in exports and the state budget deficit, the country’s foreign and domestic debt may rise.
The goal of this research is to assess and examine macroeconomic problems faced by two countries – Sweden and Saudi Arabia. Despite the seemingly different history, background, and development strategies, in the macroeconomic field, some similarities could be found. The examination of the macroeconomic problem, thus, becomes the primary goal of the study, followed by an assessment of its effects. Furthermore, the governmental policies and interventions, as well as their results, will be discussed.
Touching upon the macroeconomy field, the research methodology is usually based on empirical processes, such as deduction and the ability to interpret the existing data. This study mainly focuses on qualitative data, with process tracing of a range of secondary source material and thematic data analysis to apply pattern and meaning interpretation. The goal of the study is not to provide a new theoretical perspective on the problem but to add actual knowledge to what already exists. In terms of research philosophy, the situational method’s relativist approach is far more appropriate for this study.
Description of the Problem
International commerce is vital for developing nations because it may help them create jobs and supply foreign exchange for imports. Increasing exports from developing markets are usually critical to their continued growth and advancement. SMEs in developing nations, on the other hand, face several export restrictions when attempting to reach developed-country markets (Dieye, 2020). Small and medium-sized manufacturing enterprises in developing nations confront a variety of export marketing challenges. The export challenges encountered by manufacturing enterprises in developed and developing nations are strikingly similar. Close coordination between the government, its promotional agencies, the business community, and the private sector, in general, is required to grasp these export difficulties and give effective export support.
Sweden is usually considered as one of the competitive economies around the EU; however, economic problems do not bypass the country. The country has been steadily underperforming in the exporting spheres and losing export market shares since the end of the 2000s (European Commission, 2019). This happens for several reasons, such as high dependency on the EU market, loss of competitiveness, and declining demand for Swedish exports. Moreover, high mortgage debt and specific housing market composition also lead to the creation of macroeconomic imbalances (European Commission, 2019). Thus, despite its strong economy and impressive economic indicators, Sweden is still prone to macroeconomic problems.
In Saudi Arabia, one of the world’s oil-richest countries, the dependence of the economy on oil export is well-known. However, instabilities of the global oil market, ongoing conflicts in Syria and Yemen, and increased competitiveness resulted in Saudi’s decline in export market shares (International Monetary Fund, 2019). The push for diversification of the economy and stabilizing the stock market in order not to exaggerate already existing macroeconomic instability has become the primary goal of the kingdom, in particular, Muhammad bin Salman’s ambitious program ‘Vision 2030’.
Effect of the Problem
The loosing of export market shares can contribute to economic problems in the future. In Sweden, usually considered one of the most stable economies globally, it can lead to a growing number of unemployment and a general disbalance of trade surplus. In theory, it can also lead to the deceleration of investments into the economy. The signal of the export market share decrease is also a sign to the Swedish government on the need to find a solution to diversify its economy or try to set a foothold in new markets. Swedish exports are heavily dependent on machinery and chemical exports, branches that lost their significance in the EU market last years (European Commission, 2019). Consequently, the growth of the IT sector and the influx of a relatively unqualified migrant population leave the Swedish economy at a crossroads. With the increasing housing sector indebtedness and mortgage levels, the long-term effect of these macroeconomic instabilities can lead to a severe crisis.
The Kingdom of Saudi Arabia is facing similar problems, especially in terms of growing unemployment in the kingdom. The ultimate source of the problem is the instability of the oil market and Saudi’s dependence on oil export. The effect of it, together with the ongoing Yemen war, already created a decline in the Saudi stock market and resulted in growing petrol prices (Grand & Wolff, 2020). The COVID pandemic added its portion to it as well, resulting in one of the lowest levels of foreign investments in the 21st century (Grand & Wolff, 2020). While Saudi Arabia is struggling to diversify its economy and promote the dynamic private sector and business opportunities, the effects of macroeconomic problems are still affecting the kingdom. While politically, the potential impact of it can be considered as low, since Saudi’s monarchy is stable, enduring the Arab Spring with almost zero consequences, the growing inflation and continuing instabilities of the oil market are the source of concern, especially for the young population.
Government Intervention
Sweden aided the economy with its financial resources. The administration issued a legislative proposal in March 2014 to increase the surplus target’s accountability through yearly talks with parliament (Thelen, 2019). Unemployment among young people and low-skilled employees remains high, despite a considerable rise in migration to Sweden in recent years. Sweden has concentrated on boosting employment since the Implementation Act went into effect in 2010 by coordinating implementation initiatives through the Public Employment Service (European Commission, 2019). Losses in market share for products are increasingly being countered by increases in service exports. The Partnership Agreement and operational initiatives for 2014-2020 place the utmost importance on research and development. The International Monetary Fund analyzed the rising concern of Swedish economic sectors as part of its Financial Sector Assessment Program. The IMF commission’s findings were in line with national monetary and fiscal policies as an advisory body. After the assessment, the Swedish government has also chosen to devote 65.7 percent of Sweden’s structural budget to technology transfer and enhancement through research and development (European Commission, 2019).
Saudi Arabia’s mainstream economy has already been harmed by price volatility and tough global competition. As a result, Saudi Arabia (particularly Mohammed bin Salman) has chosen an innovative approach that addresses a wide range of economic issues. Vision 2030 is a national socio-political and economic reform aiming at diversifying Saudi Arabia’s economy and establishing a range of public services in order to reduce the country’s reliance on petroleum (Grand & Wolff, 2020). The primary objective is to boost non-oil commercial areas, including tourism, banking, and computer science.
In the face of fluctuating oil revenues, a deflationary fiscal approach has been utilized to lessen the volatility of domestic growth. Several commissions from IMF and independent economy specialists conducted Saudi economy research and revealed their findings with major suggestions to the government (International Monetary Fund, 2019). Based on that, Saudi Arabia’s government recently unveiled a $30 billion renewable energy investment plan by 2025 to lessen the country’s reliance on oil (International Monetary Fund, 2019). Saudi Arabia’s attempts to cut domestic emissions and contribute to global emissions reductions include increasing the number of renewables in the country’s energy mix. The ambitious plan of Saudi’s government is expected to influence the economy positively; however, it is still a subject for debate and criticism (from the point of view of non-economic issues, mostly).
Outcomes of Governmental Intervention
While the progress of addressing the macroeconomic imbalances in the Swedish economy is relatively slow, the impact of government interventions can still be considered positive. The main outcome of the number of government policies directed at countering macroeconomic issues is the continuing stability of the financial sector, which is essential in balancing between different economic sectors (Thelen, 2019). The low-skilled migrants and youth are still present a challenge for the employment market due to its shift to the more technological vision, while the education system is facing problems in addressing these issues. The flow of non-EU nationals from the Middle East to Sweden is an ongoing issue, which was not addressed by the government in full. However, due to the number of legislative measures paired with a solid fiscal system, the Swedish economy is not likely to suffer from the existing macroeconomic instabilities.
Saudi Arabia still requires a comprehensive overhaul of the state’s and market’s roles, as well as a shift in ordinary Saudis’ attitudes on work. The Saudi government places a high priority on the growth of capital markets and the banking sector. They were successful in passing a long-delayed bankruptcy law as well as a Companies Act that provided greater protection for minority investors (Grand & Wolff, 2020). Although the government has yet to demonstrate a sufficient desire to open the economy to genuine competition from both domestic and international enterprises, this slow and multidimensional process has already begun. The King also formed an Economic and Development Council, with Mohammed bin Salman as its chairman, to supervise the reform process (Grand & Wolff, 2020).
Conclusion
Sweden is still can be considered as one of the strongest economies in the EU. Despite the increasing unemployment in the youth segment and falls of the export market, the strong fiscal system ensured the continuation of Swedish performance on the global and local markets. The adaptation and modernization of the main export branches, addressing (though limited) the school and after-school education, and stabilizing the housing market did not exclude macroeconomic instabilities but lowered its actual and long-term effect.
Saudi Arabia has to diversify its economy since oil prices are quite unstable and the long-term future is uncertain. Export market performance should be utilized as an external standard to gauge development in areas new to Saudi Arabia. To guarantee that competition persists even in new areas, policies should try to favor sectors rather than particular enterprises. The suggested approaches such as Vision 2030 will be ineffective unless Saudi Arabians possess the necessary skills and incentives to pay them competitive rates. To guarantee that public expenditure fulfills its social and economic aims without creating hurdles to private sector employment, innovative solutions will be required.
References
Dieye, A. (2020). Overview of Current Macroeconomic Policy Issues and Challenges in Mainstream Economics. In An Islamic Model for Stabilization and Growth (pp. 11-47). Palgrave Macmillan, Cham. Web.
European Commission. Country Report Sweden 2019: Assessment of Progress of Non-Structural reforms, Prevention and Correction of Macroeconomic imbalances. European Commission Staff. Web.
Grand, S., & Wolff, K. (2020). Assessing Saudi Vision 2030: A 2020 Review. Depth Research & Reports. Web.
International Monetary Fund. (2019). Saudi Arabia: Selected Issues. IMF Country Report No. 19/291. Web.
Thelen, K. (2019). Transitions to the Knowledge Economy in Germany, Sweden, and the Netherlands. Comparative Politics, 51(2), 295-315.