Measuring the Saudi Arabia Economy
Economic Growth
Gross Domestic Product (GDP), measured in volume terms in 2018, was estimated at $689 billion (Saudi Arabia economic outlook, 2020). When compared to the previous year, the GDP of Saudi Arabia was estimated at $645 billion in 2017, signifying economic growth.
- The nominal GDP of Saudi Arabia in 2017 was estimated at $197,026 million (Saudi Arabia nominal GDP, no date).
Notably, the economy of Saudi Arabia relies on the oil industry, which affects the GDP. However, the government has introduced reforms that aim to restructure it. The investment in the state’s economy rose by 0.7% in 2018, when compared to the previous year (Saudi Arabia nominal GDP, no date). In 2018 the economy grew by 2.2% mostly due to the successful recovery of oil companies that suffered losses in 2017 (Jadwa Investment, 2019).
The non-oil economy sector has increased by 2%, also signifying a positive trend for the state. Graph 1, created by the World Bank, presented the growth of Saudi Arabia’s economy in 2018. Government expenditure, displayed in fiscal balance, is estimated at -9.2% when compared to 2017 (Saudi Arabia economic outlook, 2020). Import decreased by $5 billion, while export increased by $38 billion (Saudi Arabia economic outlook, 2020).
Unemployment
In general, the majority of the workforce in the state is engaged in working for the oil and gas industry. Unemployment allows determining how many individuals of appropriate age in a state do not have a job in comparison to the entire labour force. In Saudi Arabia, individuals older than 15 years old are considered eligible for work and are included in the employment statistics (Saudi Arabia: unemployment rate from 1998 to 2018, 2019). In 2017 the unemployment rate was 5.92%, which signifies an increase from 2017 rate of 5.89% (Saudi Arabia: unemployment rate from 1998 to 2018, 2019).
A series of economic reforms may have affected the state of Saudi Arabi’s labour force in 2018.
The release from the General Authority for Statistics suggests that:
- In total, there are 12,688,042 employed individuals in Q4 of 2018 (Unemployment rate, 2019)
- Out of them, 9,578,055 are non-Saudi employed persons
Inflation
Using the Laspeyres formula, the inflation in Saudi Arabia in 2018 reached 2.2% (Saudi Arabia – Average consumer prices inflation rate, no date). Inflation rates in December 2018 were estimated at 2.2%, while in 2017 the rate was -0.7%. The Consumer Price Index (CPI) in January 2017 was 136, while in July 2017, it increased reaching 137.7 (Consumer price index, 2019). However, annual CPI in 2017 is estimated at 117, indicating an increase in 2018. In 2018 it was estimated at 120.9 (Saudi Arabia – Consumer price index, no date). According to Trading Economics (no date), the most important elements of Saudi Arabia’s CPI are food and beverages, housing and water, transport, furniture, and other categories. Graph 2 displays the change in Saudi Arabia’s CPI from 2017 to 2018.
Components of economic growth
Consumption
Household consumption from 2017 to 2018 increased. In 2018, the consumption totaled at $298,197,000,00 while in 2017 it was $283,678,000 (IndexMundi, no date). The annual growth of household consumption in 2018 was 1.9%, as can be seen in Graph 3. Consumer confidence, measured using The Nielsen Global Survey of Consumer Confidence and Spending Intentions in 2018 was 98 in July 2017 and increased to 107 by July 2018 (Consumer price index, 2019; Saudi Arabia – Average consumer prices inflation rate, no date; ).
Since this index measures the confidence of citizens regarding their jobs, financial status, plans regarding purchases, one can conclude that a positive trend was present in the examined timeframe. Moreover, scores below 100 suggest an overall pessimistic attitude of consumers, which can be connected to the struggles experienced by Saudi Arabia’s economy in 2017 and economic improvement in 2018.
Public Finances
Foreign direct investment has increased by 120% between 2017 and 2018, according to the United Nations (2019) report. In total, the investment over this period is estimated at $3.2 billion. One reason for such change is policies connected to the encouragement of foreign investment in different industries, including recruitment and employment, real estate, land transportation, and others. When comparing the government expenditure in 2018 and 2017, the overall budgets were set at $261 billion and $250 billion respectively. Expenditures in 2018 were estimated at 35.1% of GDP, while the public reached 19.1% of GDP.
External Trade
According to the World Trade Organisation estimations, Saudi Arabia’s export reached $294,373 million for goods, while import was $137,065 (cited in Saudi Arabia: Presentation, no date). The trade balance in 2018 was estimated at $168 billion when compared to $74.2 billion in 2017. The main export goods include petroleum, both crude and refined, ethylene polymers, and others. The positive trend is connected to the strengthening of the state’s economy after 2017.
Reference List
Consumer price index (2019) Web.
Index Mundi (no date) Saudi Arabia. Web.
Jadwa Investment (2019) The Saudi Economy in 2019. Web.
Saudi Arabia – Average consumer prices inflation rate (no date) Web.
Saudi Arabia – Consumer price index (no date). Web.
Saudi Arabia economic outlook (no date). Web.
Saudi Arabia GDP – Gross Domestic Product (no date). Web.
Saudi Arabia GDP (no date). Web.
Saudi Arabia: presentation (no date). Web.
Saudi Arabia: unemployment rate from 1998 to 2018 (2019). Web.
Trading Economics (no date) Saudi Arabia consumer price index (CPI) . Web.
United Nations (2019) World investment report. Web.
Unemployment rate (2019) Web.
World Bank (no date) GDP per capita – current (US$) – Sauidi Arabia. Web.